Decoupling Dynamics: AI's Role in Global Supply Chains
2nd April, 2024
Considering the evolving dynamics of global trade and the quest for geopolitical stability, how could future technological advancements, particularly in artificial intelligence (AI), catalyze the development of alternative global supply chain configurations that aim to reduce dependency on China? In examining these emerging configurations, what would be the implications for shifting geopolitical power balances, global economic growth, and innovation? Furthermore, how can these technological innovations not only foster resilience in supply chains but also redefine the nature of global interdependencies and competitiveness?
First Layer
In the currents of global trade and geopolitical relations, the trajectory towards diversifying supply chains and reducing dependency on China is gaining impetus. A central catalyst in this shift is the burgeoning field of Artificial Intelligence (AI), which harbors the potential to revolutionize supply chain configurations. The implications of such a transformation extend across the realms of geopolitical power balances, global economic growth, innovation, and the very fabric of global interdependencies and competitiveness.
Technological Advancements and AI Integration
The integration of AI in supply chains is at the forefront of technological innovation, offering a paradigm shift in how global trade operates. AI's capabilities, ranging from predictive analytics for demand forecasting, blockchain for enhancing transactional transparency, to machine learning algorithms optimizing logistics and manufacturing processes, present a robust framework for diminishing reliance on China-centric supply chains. The direct application of these technologies in diversifying supply sources and operational efficiencies circumvents the traditional bottlenecks associated with centralized manufacturing hubs, offering a more resilient supply chain model.
Geopolitical and Economic Impacts
The strategic repurposing of supply chains, facilitated by AI, is poised to reshape geopolitical power dynamics significantly. Countries that are early adopters and innovators of AI technologies could emerge as new epicenters of manufacturing and trade, thereby altering the current China-centric economic paradigm. This decentralization of manufacturing capabilities, especially towards regions with burgeoning technological landscapes such as Southeast Asia and India, could lead to a more equitable global economic development model. Furthermore, the competition to harness AI in global supply chains will catalyze innovation, driving economic growth by creating new industries and transforming existing ones.
Resilience and Redefinition of Global Interdependencies
AI-driven supply chain diversification fosters resilience against global disruptions, be they pandemics, geopolitical tensions, or environmental catastrophes. This newfound resilience, in turn, redefines global interdependencies, transitioning from a hegemonic supply chain model to a multipolar one. In this new configuration, technological prowess and the ability to innovate become the currency of global competitiveness, signaling a shift from the traditional metrics of labor costs and manufacturing capacity.
Challenges and Solutions
Yet, the transition towards AI-enhanced supply chains is fraught with challenges. The disparity in AI technology maturity among nations, coupled with the complex web of international IP and data privacy regulations, poses significant barriers. Ensuring an equitable transition necessitates fostering international collaborations, standardizing AI governance, and facilitating technology transfers to bridge the digital divide. Moreover, the socio-economic impacts of AI-driven automation, such as job displacement, demand careful navigation to ensure inclusive growth.
Actionable Insights and Recommendations
To capitalize on AI's potential in reconfiguring global supply chains, specific actionable steps are paramount. Policymakers must craft regulatory frameworks that encourage AI adoption while safeguarding data privacy and intellectual property. Governments and international bodies should incentivize cross-border collaborations in AI research and development, and the creation of common standards for AI applications in supply chain management. For businesses, investing in AI capabilities and forging strategic partnerships will be critical to navigating the evolving landscape. Furthermore, robust strategies must be developed to manage the socio-economic implications of automation, prioritizing skills development and workforce adaptability.
In conclusion, leveraging AI presents a viable pathway towards diminishing global supply chain dependency on China, with profound implications for geopolitical power shifts, economic development, and global competitiveness. However, realizing this vision demands concerted efforts from global stakeholders to navigate the inherent challenges and harness AI's full potential for a resilient, diversified, and equitable supply chain future.
Second Layer
A more refined and comprehensive analysis is warranted to fully understand the potential of Artificial Intelligence (AI) in facilitating the development of alternative global supply chain configurations and its implications on reducing dependency on China. This enhanced projection will delve deeper into the nuances of AI's impact, addressing the identified gaps in the initial assessment with greater technical detail, evidence-based reasoning, and a balanced view of the challenges alongside the opportunities it presents.
Advanced AI Technologies in Supply Chain Optimization
AI's transformative role in reshaping global supply chains extends beyond predictive analytics and blockchain. Crucial technologies such as deep learning algorithms for demand forecasting, AI-powered robotics for automated warehouse operations, and advanced analytics for optimally routing logistics contribute significantly to operational efficiency. For instance, companies like DHL and Maersk are leveraging AI to predict shipments' transit times accurately, reducing delays and enhancing customer satisfaction. These specific instances demonstrate AI's practical implementation in streamlining supply chain processes, thereby reducing the overreliance on single-source manufacturing hubs like China.
Addressing Infrastructural and Regulatory Hurdles
Transitioning manufacturing bases from China to regions such as Southeast Asia and India involves complex challenges. Despite their potential, these regions grapple with infrastructural deficits, regulatory inconsistencies, and an underdeveloped ecosystem for advanced technologies. Efforts to overcome these challenges must include substantial investments in digital infrastructure, regulatory reforms to ease the establishment of high-tech firms, and initiatives to foster skilled talent pools capable of driving AI innovation. A nuanced examination reveals that India, under its PLI scheme, is incentivizing semiconductor manufacturing—a move aimed at strengthening its position in the global supply chain landscape. However, significant advancements and policy harmonization are essential for these regions to parallel China's manufacturing prowess.
Socio-Economic Implications and Policy Responses
The socio-economic repercussions of AI-driven automation, particularly job displacement, necessitate a multi-faceted policy approach. Upskilling programs, social safety nets, and incentives for industries transitioning towards automation are vital measures. Furthermore, assessing sector-specific impacts reveals that automation could enhance productivity in manufacturing sectors while posing disruptions in labor-intensive industries. These insights underscore the need for balanced policies that foster innovation while mitigating adverse impacts on employment.
The Geopolitical Balancing Act
The optimistic vision of AI as a decentralizing force in global production must be tempered with a realization of China's entrenched position and its potential strategic responses. The projection into alternative futures must consider scenarios where China leverages its technological advancements, such as 5G and digital currency, to maintain its centrality in the global economic order. An analysis encompassing these dimensions reveals a complex interplay of innovation, geopolitics, and trade, where AI acts as both a catalyst for diversification and a domain of strategic competition.
Concrete Steps Towards Supply Chain Diversification
To pragmatically advance towards a less China-dependent supply chain, a detailed roadmap is essential. This includes advocating for international cooperation in setting common standards for AI in manufacturing, fostering regional innovation hubs to incubate AI-driven logistics and manufacturing startups, and strategic partnerships to secure raw materials outside China's purview. For instance, the formation of a global alliance on AI ethics and standards could serve as a cornerstone for leveraging AI in creating resilient and diversified supply chains.
Embracing Radical Innovations
Exploring the synergy between AI, quantum computing, and IoT unveils radical possibilities for future-proofing supply chains. Quantum computing, with its superior processing capabilities, could solve complex logistical problems in moments, while IoT devices could offer real-time tracking of goods across a decentralized manufacturing landscape. Such an integrative approach magnifies the potential for achieving substantial shifts away from dependency on China, underscoring the role of groundbreaking technologies in redefining the future of global supply chains.
In sum, leveraging AI offers a viable pathway towards diminishing global supply chain dependency on China, with profound implications for geopolitical power shifts, economic development, and global competitiveness. However, actualizing this vision demands a comprehensive, evidence-based strategy that acknowledges the challenges, fosters innovation, and encourages collaborative efforts across the globe. Through detailed analysis and strategic insight, this projection aims to provide a clearer, actionable pathway towards leveraging AI for a resilient, diversified, and equitable supply chain future.
NA Preparation
Material Facts
The ongoing discourse on enhancing global supply chain resilience and the quest to diminish dependency on China involves a multifaceted examination of geopolitical, economic, and notably, technological factors, particularly artificial intelligence (AI). The potential of AI to drive alternative global supply chain configurations is not only indicative of technological progression but also of a strategic pivot in manufacturing paradigms, economic policies, and geopolitical dynamics.
Role of Artificial Intelligence in Supply Chain Innovation
AI's transformative impact on supply chains is predominantly characterized by its ability to optimize efficiencies, predict disruptions, and foster adaptability across diverse manufacturing settings. Machine learning algorithms for predictive maintenance can drastically reduce downtime in manufacturing units, while AI-driven logistics platforms can enhance route optimization, foreseeing delays and dynamically updating pathways to ensure timely deliveries. In semiconductor manufacturing, AI's role in precision engineering and production processes underscores its capacity to uphold high-quality standards, irrespective of the manufacturing locale, thereby offering viable alternatives to China's current dominance.
Economic Policies and Investment Recalibration for Technological Infrastructures
The integration of AI into supply chain configurations necessitates supportive economic policies, including tax incentives for AI research and development, subsidies for advanced manufacturing facilities, and grants for startups pioneering supply chain innovations. India's production-linked incentive (PLI) scheme, aimed at fostering local manufacturing, presents an example of how policy frameworks can encourage technological advancements and investment in AI-centric manufacturing capabilities, vital for diversifying supply chains.
Geopolitical Realignments and Regional Manufacturing Hubs
Geopolitical tensions, as illustrated by the Russia-Ukraine conflict and its consequent impact on global supply chains, spotlight the necessity for resilient manufacturing networks. AI’s role in enabling countries to swiftly respond to such disruptions, by rapidly recalibrating manufacturing outputs and logistics, is crucial. Furthermore, the strategic establishment of regional manufacturing hubs, facilitated by AI-driven supply chain optimizations, could significantly mitigate risks associated with geopolitical instabilities.
Implications for Global Economic Growth and Innovation
AI-driven supply chain diversification has profound implications for global economic growth, heralding a shift towards more equitable economic development as manufacturing capabilities broaden across emerging economies. Moreover, the competition to innovate within AI and supply chain technologies could spearhead a new era of technological advancements, propelling global economic growth and fostering a competitive yet collaborative international economic environment.
Shifting Nature of Global Competitiveness and Interdependencies
The adoption of AI in developing alternative supply chain configurations inherently redefines global competitiveness, prioritizing technological prowess and the ability to innovate swiftly. This shift not only diminishes dependency on any single nation but also engenders a new form of global interdependency, centered around technology, knowledge exchange, and collaborative innovation.
In conclusion, leveraging AI and related technological advancements is paramount in constructing resilient and diversified global supply chains, minimizing reliance on China, and countering geopolitical uncertainties. These technological innovations, coupled with strategic economic policies and geopolitical maneuvering, hold the potential to reshape global economic landscapes, fostering an era marked by resilience, equity, and continuous innovation.
Force Catalysts
In the intricate web of global supply chains, the advent of Artificial Intelligence (AI) presents a pivotal force catalyst capable of reshaping the landscape of international trade and manufacturing. This technology, driven by data-driven algorithms, machine learning, and automation, holds the promise of diversifying supply chains and minimizing the global economy’s entrenched reliance on China. This shift not only harbors potential for recalibrating geopolitical balances but also has profound implications for economic growth, innovation, and global competitiveness.
The Multifaceted Role of AI in Supply Chain Resilience
AI's role in fostering supply chain resilience transcends mere operational efficiencies. It encapsulates a strategic endeavor towards creating a more diversified and agile global supply architecture. Predictive analytics, for instance, empowers businesses with foresight into market trends and potential disruptions, enabling preemptive adjustments to supply chain strategies. Machine learning algorithms enhance logistics and inventory management, optimizing the flow of goods while minimizing costs and waste. Furthermore, AI-driven automation in manufacturing processes propels the nearshoring and onshoring of production facilities, effectively mitigating the risks associated with over-reliance on a single geographical locale.
Sectoral Impact and Geopolitical Realignments
The impact of AI on various sectors reveals a nuanced narrative. In traditional manufacturing domains, AI accelerates a shift towards localized production models, challenging China’s preeminence by enabling countries to leverage technological efficiencies to regain manufacturing capabilities. In contrast, in sectors like biotechnology and renewable energy, AI fosters an ecosystem of innovation that is inherently global, propelling the creation of decentralized supply networks that are both resilient and responsive to changing market demands.
This technological evolution naturally instigates geopolitical realignments. The dispersion of supply chains through AI introduces a new axis of geopolitical power, pivoted not solely on economic might but on technological innovation capabilities. Countries that harness AI’s potential in restructuring their supply chains not only gain economic independence but also elevate their stature and influence on the global stage.
Navigating the Path Forward: Challenges and Opportunities
The transition towards AI-integrated supply chains, while promising, is punctuated with challenges ranging from regulatory discrepancies across nations to significant initial investment requirements. The variations in AI governance and data protection laws across jurisdictions pose considerable hurdles to seamless global integration. Economically, the capital-intensive nature of developing and deploying AI technologies necessitates strategic public-private partnerships and international cooperation to share the burden of investment and accelerate the adoption of AI across industries.
Forecasting the Future of AI and Global Supply Chains
As we peer into the future, the trajectory of AI’s influence on global supply chains suggests a landscape of diversified geopolitical power centers, with technological innovation and AI capabilities becoming central to economic and strategic dominance. This shift advocates for a new form of global competition centered around technological innovation, digital infrastructure, and talent cultivation. Countries and corporations alike are called upon to prioritize the development of AI capabilities, not merely as a tool for economic efficiency but as a strategic asset vital for securing a competitive edge in the evolving global order.
Synthesizing a Strategic Response: A Holistic Approach
To harness the transformative potential of AI in decentralizing global supply chains and reducing dependency on single-nation dominance, a multifaceted approach is essential. This strategy encompasses fostering technological innovation, cultivating AI talent, and forging international collaborations focused on standardizing AI governance and facilitating cross-border data flows. Equally critical is the emphasis on creating an inclusive landscape where the benefits of AI-driven supply chain resilience are equitably distributed, ensuring global economic stability and growth.
In conclusion, the integration of AI within global supply chains represents a convergence of technology and strategy, heralding a new era of decentralized, resilient, and innovative global trade mechanisms. The journey towards this future mandates a concerted effort from nations, industries, and the global community to navigate the complexities and unlock the full potential of AI as a force catalyst in redefining the architecture of global supply chains.
Constraints and Frictions
In the landscape of global supply chains, the intricate web of dependencies, particularly the pronounced reliance on China as the world's manufacturing hub, is facing unprecedented scrutiny and calls for diversification. Technological advancements, especially in the realm of artificial intelligence (AI), emerge as a pivotal force capable of catalyzing the development of alternative configurations in global supply chains. These alternative configurations aim not just to mitigate the risks associated with over-dependence on a single geopolitical entity but also to foster resilience, economic growth, and innovation across the globe.
The infusion of AI into supply chain dynamics promises to revolutionize the way goods are produced, distributed, and consumed. However, this transformation is tethered to a complex array of constraints and frictions, which can significantly shape the trajectory and effectiveness of AI-driven supply chain diversification efforts.
Constraints in AI-Driven Supply Chain Diversification
Intellectual Property (IP) and Data Privacy
The deployment of AI technologies across borders is fraught with IP challenges and data privacy concerns. Regulations such as the General Data Protection Regulation (GDPR) in the European Union, the California Consumer Privacy Act (CCPA) in the United States, and China's Cybersecurity Law present a labyrinth of legal considerations that must be navigated carefully. These laws differ significantly in their stipulations, affecting how data can be collected, stored, and utilized in AI systems. The variability in regulatory landscapes can impede the seamless integration of AI across international supply lines, complicating compliance and operational efficiency.
Technological Limitations and Quality of Data
The efficacy of AI is inherently dependent on the quality of data fed into its algorithms. The presence of biased or incomplete data sets can lead to inaccuracies in forecasting, decision-making, and operational efficiency. Moreover, the nascent state of AI technologies in certain aspects, such as natural language processing and contextual understanding, limits their applicability in solving complex supply chain challenges that require nuanced interpretation and adaptability.
Socio-political Frictions
The shift towards AI-driven supply chains may exacerbate socio-political frictions, particularly concerning labor displacement and public resistance against automation. The fear of job losses and the societal implications of widespread automation could lead to resistance from both the workforce and policymakers, especially in regions heavily reliant on manufacturing for employment.
Implications for Geo-political Power Balances and Economic Growth
The reconfiguration of global supply chains through AI has profound implications for geopolitical power balances. Nations leading in AI technology and adoption could gain significant strategic advantages, potentially reshaping global trade dynamics and altering the current hegemonic structures. For economies that have traditionally been manufacturing powerhouses, such as China, this shift could pose challenges to their economic model, prompting a need for adaptation towards higher-value-added sectors.
Conversely, for countries currently classified as developing economies, the advent of AI poses both challenges and opportunities. Nations like India, with strong capabilities in software and services, could leverage AI to build new manufacturing competencies, albeit this transition may require substantial investments in infrastructure and education to upskill the workforce.
Rethinking Global Interdependencies and Competitiveness
The AI-driven transformation of supply chains necessitates a reevaluation of global interdependencies. As nations strive for greater autonomy and resilience in their supply chains, the role of international cooperation and collaboration becomes critical. Countries and companies need to forge strategic partnerships that align with shared objectives of diversification and resilience, ensuring that the benefits of AI are equitably distributed and contribute to global economic stability.
In the realm of competitiveness, AI offers tools to enhance efficiency, reduce costs, and innovate product offerings, enabling companies to differentiate themselves in a crowded market. However, this competitive edge is contingent on the ability to navigate the aforementioned constraints effectively and ethically.
Forward-looking Perspectives
As global dynamics continue to evolve, the role of AI in reshaping supply chains will undoubtedly grow. To fully realize the potential of AI in mitigating dependencies on China, a multifaceted approach is necessary—one that accounts for the intricate balance between technological innovation, regulatory compliance, socio-political acceptability, and ethical considerations. Continual refinement, informed by robust data and feedback mechanisms, will be crucial in adapting AI applications to the changing landscape of global trade and geopolitics.
Alliances and Laws
The exploration of global supply chain resilience and the potential for decoupling from China is a complex and multifaceted issue that intersects with technological advancements, particularly in the realm of Artificial Intelligence (AI). The integration of AI and other emerging technologies could indeed catalyze the formation of alternative global supply chain configurations, aiming to reduce dependency on China. This shift can be analyzed through several lenses: implications for geopolitical power balances, global economic growth, and innovation, as well as how these innovations could foster supply chain resilience and redefine global interdependencies and competitiveness.
Technological Advancements and Supply Chain Resilience
Future technological advancements, spearheaded by AI, possess the capacity to significantly alter current manufacturing and supply chain dynamics. Automation, predictive analytics, and AI-driven logistics can enable countries and companies to diversify their manufacturing bases away from China, making supply chains more resilient to geopolitical and pandemic-induced disruptions. This shift relies on accelerated digital transformation and the adoption of Industry 4.0 practices, which could potentially democratize manufacturing capabilities, allowing for a more widespread global dispersion of production centers.
Implications for Geopolitical Power Balances
A pivotal decrease in global dependency on China for manufacturing could lead to a rebalancing of geopolitical power. China's ascendancy as a global superpower has been significantly fueled by its dominant position in global manufacturing and trade. A successful diversification of manufacturing capabilities, aided by AI and technological innovations, could see other countries, particularly India and nations in Southeast Asia, emerge as significant players in the global supply chain. This transition, however, is contingent upon the development of infrastructure, regulatory frameworks, and ecosystems that foster innovation and manufacturing excellence.
Global Economic Growth and Innovation
The development and deployment of AI technologies in reconfiguring global supply chains could spur a new wave of economic growth and innovation. Increased investment in AI research and development, along with incentives for digital transformation in manufacturing sectors, can drive productivity gains, create high-skilled jobs, and stimulate economic activity. However, the transition may also exacerbate the digital divide, both within countries and globally, potentially leading to uneven gains from this era of technological advancement unless addressed through inclusive growth strategies.
Redefining Global Interdependencies and Competitiveness
Technological innovations, especially AI, can help redefine the nature of global interdependencies and competitiveness. As AI empowers nations to reduce reliance on specific partners for critical goods, it fosters a scenario where economic and strategic partnerships are based on digital capabilities and innovation ecosystems rather than mere access to manufacturing facilities. Consequently, competitiveness in the global arena could increasingly hinge on a country's ability to innovate, adapt to fast-evolving digital landscapes, and secure its digital infrastructure—an aspect that goes beyond traditional manufacturing strengths.
Conclusion
While the pathway to reducing global dependency on China and fostering resilience in supply chains involves embracing AI and other technological advancements, it remains fraught with challenges and uncertainties. The transition requires substantial time, investment, and collaboration between nations and the private sector. Moreover, it signals a shift towards an era where economic power could become more dispersed and aligned with countries' digital and innovative capacities. Nevertheless, as indicated in the discussion, countries like India have significant hurdles to overcome, particularly in matching China's manufacturing scale and sophistication in the short term. The evolution of global supply chains, thus, will not only be a testament to technological prowess but also to geopolitical will, policy innovation, and the ability to forge new partnerships in a rapidly changing world.
Information
As part of the Urban Redevelopment Authority's (URA) decentralisation strategy, regional commercial hubs such as Jurong Lake District , Punggol Digital District and Woodlands Regional Centre have experienced significant development in recent years. This includes infrastructure enhancements as well as improved road and public transport connectivity.
While average rents in core central business district (CBD) areas such as Raffles Place and Tanjong Pagar hover at approximately S$10 and above per square foot , they fall within a more affordable range in decentralised hubs.
Amid this landscape, Paya Lebar Central stands out as a promising option, offering businesses the amenities of a modern commercial precinct that is a stone's throw from the city centre.
A HUB ON THE CITY FRINGE
The scheduled relocation of Paya Lebar Airbase in 2030 as part of the URA Master Plan is expected to free up an estimated 800 hectares of land, the equivalent of around five Toa Payoh towns , and bring about the relaxation of building height restrictions.
These changes will mark the advent of taller, smart-tech-enabled developments ranging from offices and factories to homes and logistic facilities. Furthermore, an increase in green spaces such as park connectors, waterways and nature corridors is poised to cultivate a more sustainable and liveable environment.
UOB on Thursday (Feb 22) cut its 2024 loan growth projections to low single-digits from mid-single digits after posting a stronger-than-forecast 22 per cent jump in fourth-quarter net profit.
UOB maintained its 2024 guidance for double-digit fee growth while projecting total income to see positive growth, CEO Wee Ee Cheong said in a briefing on the bank's earnings.
Wee said UOB focuses "on high quality customers" for loan growth while it expected double-digit fee growth would be led by its retail franchise in cards and wealth.
Credit costs for 2024 are expected to be at the lower end of its previous 25 to 30 basis points guidance range, he added.
"2023 was a challenging year. We saw slowing demand globally, more geopolitical tensions, sticky inflation and higher interest rates," Wee said. "We expect some of these to persist this year but the impact should be manageable."
Wee said Southeast Asia remained a bright spot due to robust domestic demand, recovery in tourism and investment flows into the manufacturing sector as multi-national companies diversified supply chains.
Shares of UOB dropped 2.4 per cent on Thursday in early trade, underperforming the local benchmark index's 0.5 per cent decline.
Singapore's banks, the largest in Southeast Asia, are set to post higher profits for the fourth quarter because of higher interest rates, though growth momentum is poised to slow as global central banks pivot toward rate cuts and volatile markets weigh on their mainstay wealth business.
DBS earlier this month reported a 2 per cent rise in fourth-quarter net profit that beat forecasts but projected 2024 net interest margin to be slightly below last year as interest rates are expected to soften.
OCBC is due to announce its results on Feb 28.
UOB, which is Southeast Asia's third-largest bank by assets, said October-December net profit climbed to S$1.4 billion (US$1.04 billion) from S$1.15 billion a year earlier.
This beat the mean estimate of S$1.37 billion from three analysts polled by LSEG.
The bank recommended the payment of a final dividend of 85 Singapore cents per share, bringing the total dividend for 2023 to S$1.70 per share.
UOB's 2023 net interest margin, a key gauge of profitability, rose to 2.09 per cent from 1.86 per cent a year earlier.
The bank said its wealth asset under management rose 14 per cent to S$176 billion.
Factory activity in many Asia economies weakened in March despite a rebound in China as lacklustre domestic demand dragged on growth, surveys showed on Monday (Apr 1), clouding the outlook for a once fast-expanding, key driver of the global economy.
Export powerhouses Japan and South Korea saw manufacturing activities shrink, as well as Taiwan, Malaysia and Vietnam in a sign of the fragile state of the region's economies.
China's Caixin/S&P Global manufacturing purchasing managers' index (PMI) rose to 51.1 in March from 50.9 the previous month, a private survey showed on Monday, expanding at the fastest pace in 13 months with business confidence hitting an 11-month high.
The finding joins an official PMI survey released on Sunday that showed China's factory activity expanded for the first time in six months.
The rebound in China, which is struggling to mount a strong economic revival partly due to a protracted property crisis, provides some welcome relief to Beijing and investors globally.
Yet, the weakness in other parts of Asia highlights the challenge the region's policymakers face as they wrestle with patchy signs of recovery in global demand and uncertainty on when the US Federal Reserve would start to cut interest rates.
"China's exports are picking up a bit but that's because their goods are cheap. That means other Asian countries must compete with China for demand that's not growing," said Toru Nishihama, chief emerging market economist at Dai-ichi Life Research Institute.
"With no clear driver of global growth, it's hard to paint a rosy outlook for Asia," he added.
Japan's final au Jibun Bank PMI stood at 48.2 in March, the highest level since November and recovering from February's 47.2 which marked the fastest pace of contraction in over 3-1/2 years.
But activity contracted for a 10th straight month as new export orders slumped, reflecting souring sentiment in key markets like China and North America, the survey showed.
South Korea's manufacturing activity also weakened in March as slowing domestic demand offset robust overseas sales with the PMI falling to 49.8 in March from 50.7 in February.
Taiwan's PMI fell to 49.3 in March from 48.6 in February, while that for Vietnam dropped to 49.9 from 50.4, and Malaysia's declined to 48.4 from 49.5, the surveys showed.
By contrast, manufacturing activity expanded in March in the Philippines and Indonesia, the surveys showed.
In revised forecasts issued in January, the IMF projected Asia's economy to expand 4.5 per cent this year, driven by robust U.S. demand and the boost from expected stimulus measures in China.
But it said the recovery would be divergent across economies with Japan likely to see growth slow to 0.9 per cent, in contrast to an expected 6.5 per cent expansion in India. The IMF expects China's economy to expand 4.6 per cent this year, slowing from 5.2 per cent in 2023.
TOKYO :Business sentiment among big Japanese non-manufacturers improved to a more than three-decade high in the first quarter, a closely watched central bank survey showed, offering policymakers hope that domestic demand will underpin a fragile economic recovery.
But big manufacturers' sentiment soured for the first time in four quarters due in part to auto production disruptions, according to the tankan survey released on Monday.
The outcome is among factors the Bank of Japan (BOJ) will scrutinise in its next meeting on April 25-26, when it issues fresh quarterly growth and inflation forecasts.
The April projections will draw market attention for any clues on how soon the BOJ could raise interest rates again, after having exited its massive stimulus programme last month.
The headline sentiment index for big manufacturers stood at +11 in March from +13 in December, the tankan survey showed, compared with a median market forecast for a +10 reading.
The index gauging big non-manufacturers' sentiment improved to +34 in March from +32 three months ago, the survey showed, slightly exceeding a market forecast of a reading of +33.
It was the highest reading since August 1991, when Japan's economy was booming from an asset-inflated bubble, and driven by a surge in inbound tourism and a boost to corporate profits from price hikes, a BOJ official told a briefing.
"The BOJ probably remains confident about service sector sentiment," said Takeshi Minami, chief economist at Norinchukin Research Institute.
"I think the BOJ could raise interest rates one more time this year if wage hikes accelerate."
Big firms expect to increase capital expenditure by 4.0 per cent in the fiscal year starting in April, against median forecasts of a 9.2 per cent rise, the survey showed.
Both big manufacturers and non-manufacturers expect conditions to worsen three months ahead, the survey showed.
Some companies worried about global economic uncertainty and prospects of rising labour costs due to a tight job market, the BOJ official said.
Japan's economy expanded an annualised 0.4 per cent in the final quarter of last year, narrowly averting a technical recession as robust capital expenditure offset weaknesses in consumption.
Analysts expect the economy to have barely grown in the first quarter as rising living costs hurt consumption, and output disruptions at some auto factories weighed on industrial production.
Business sentiment and corporate spending appetite are key to whether Japan's economy can sustain a moderate recovery and allow the central bank to raise interest rates again.
Despite the BOJ's decision to end negative rates last month, expectations that any further rate hikes by the BOJ will be slow in forthcoming have pressured the yen and briefly pushed it to a 34-year low against the dollar.
China's manufacturing activity expanded for the first time in six months in March, an official factory survey showed on Sunday (Mar 31), offering relief to policymakers even as a crisis in the property sector remains a drag on the economy and confidence.
The official purchasing managers' index (PMI) rose to 50.8 in March from 49.1 in February, above the 50-mark separating growth from contraction and topping a median forecast of 49.9 in a Reuters poll.
Though the pace of growth was modest, it was also the highest PMI reading since March of last year, when momentum from the lifting of tough COVID-19 restrictions began to stall.
"From the indicators, domestic supply and demand has improved, while homeowner and business confidence is recovering, while willingness to consume and invest are increasing," said Zhou Maohua, an analyst with China Everbright Bank.
New export orders rose into positive territory, breaking a 11-month slump, but employment continued to shrink, albeit at a slower rate, the PMI data showed.
Recent upbeat indicators suggest the world's second-largest economy is slowly getting back on better footing, leading analysts to start upgrading their growth forecasts for the year.
Policymakers have wrestled with persistent economic sluggishness since the abandonment of COVID-19 curbs in late 2022, amid a deepening housing crisis, mounting local government debts and weakening global demand.
"March data show the economy is poised for a strong end to Q1," China Beige Book, an advisory firm, said in a note last week. "Hiring recorded its longest stretch of improvement since late 2020. Manufacturing picked up, as did retail."
However, a deep slump in the Asian giant's property sector remains a major drag on growth, testing the health of heavily indebted local governments and state-owned banks' balance sheets.
The official non-manufacturing PMI, which includes services and construction, rose to 53 from 51.4 in February, marking the highest reading since September.
Premier Li Qiang announced an ambitious 2024 economic growth target of around 5 per cent earlier this month at the annual meeting of the National People's Congress, China's parliament.
But analysts say policymakers will need to roll out more stimulus to hit that target as they will not be able to count on the low statistical base of 2022 which flattered 2023 growth data.
Citi on Thursday raised its economic growth forecast for China for this year to 5.0 per cent from 4.6 per cent, citing "recent positive data and policy delivery".
China's Cabinet on Mar 1 approved a plan aimed at promoting large-scale equipment upgrades and sales of consumer goods. The head of the country's state planner told a news conference earlier this month the plan could generate market demand of over 5 trillion yuan (US$691.63 billion) annually.
Many analysts worry that China may begin flirting with Japan-style stagnation later this decade unless policymakers take steps to reorient the economy towards household consumption and market-allocation of resources, and away from the heavy reliance on infrastructure investments seen in the past.
The Russia-Ukraine conflict has caused an exponential rise in the price of commodities, given that the two warring countries are key exporters of fossil fuels , food grains , fertilisers and metals. Disruptions in the supply of these commodities have drastically affected the global economy, including in Southeast Asia.
In 2020, the Association of Southeast Asian Nations (ASEAN) imported 9.7 per cent of its fertiliser from Russia and 9.2 per cent of its cereals from Ukraine. According to the World Bank, the conflict will cause global prices of energy and food to rise by 50 per cent and 20 per cent respectively in 2022. The inflation rate for ASEAN as a group increased from 3.1 per cent in 2021 to 4.7 per cent in 2022.
COMMODITY CRISIS UNDERMINES CLIMATE AMBITIONS
In addition to stunting economic growth, the commodity crisis is already undermining Southeast Asia's climate ambitions.
To reduce inflationary pressures, the Philippines recently doubled its fuel subsidy programme for public transport and also plans to increase the use of coal in electricity generation. Malaysia's oil subsidies can reach more than US$6 billion this year, while Indonesia has ramped up coal exports . Thailand and Vietnam also recently increased fossil fuel subsidies.
ASEAN's renewable energy target of 23 per cent by 2025 is also impacted by supply shocks of critical minerals that can enable the transition to green energy.
As economic sanctions against Moscow have not taken their full effect, Russia is still the world's largest exporter of nickel and palladium. Nickel is an important component of batteries that power electric vehicles, while palladium is used to produce catalytic converters a part of a car's exhaust system that controls emissions.
Following United States sanctions on Russia, the price of nickel and palladium increased by as much as 60 per cent and 25 per cent respectively, which led to concerns about the economic viability of renewable energy technologies.
Ukraine is the world's leading supplier of neon gas, which is used for producing semiconductors critical components of electric vehicles and communication technologies.
Bond fund giant Pimco is holding a smaller than usual position in US Treasuries and prefers the bonds of countries such as the UK and Canada, as it believes inflationary pressures may lead the Federal Reserve to cut interest rates more slowly than other major central banks.
Andrew Balls, chief investment officer for global fixed income at the $1.9tn-in-assets firm, told the Financial Times that weaker economic growth in some countries was helping ease price pressures there faster than in the US.
"Outside of the US...we are seeing more evidence of inflation correcting," he said. "I think you see the balance of risks on the Fed going slower [in cutting rates] than is priced in but outside the US there is some risk of central banks delivering more than is priced in."
Balls prefers longer-dated government bonds which are more sensitive to changes in interest rates outside of the US, and holds a smaller position than the benchmark index in the US. Markets at present anticipate three 0.25 percentage point cuts by the Fed and Bank of England this year, while for the European Central Bank it is closer to four.
US inflation has come in above analysts' forecasts in January and February this year. Last week, Fed chair Jay Powell played down the recent uptick as the US central bank stuck to its forecast of 0.75 percentage points of interest rate cuts this year.
Powell also suggested it was too soon to know whether recent signs of stickier than expected inflation, especially in the services sector, would last. But he said he did not think recent readings had "really changed the overall story" of price pressures easing to 2 per cent.
Balls said that while his baseline expectations for inflation and Fed rate cuts were similar to market consensus, he sees "the risks towards stronger activity and sticky inflation.
"You have an ongoing US exceptionalism theme," he added.
He also warned that the US's yawning budget deficit which the Congressional Budget Office estimates will rise by almost two-thirds over the next decade to $2.6tn would likely push up long-dated Treasury yields, reflecting a fall in prices.
Ten-year US borrowing costs have risen to 4.2 per cent from 3.9 per cent at the start of the year, but remain far below a peak of more than 5 per cent reached last October when markets were worried about bigger than expected government borrowing plans.
"You can imagine that happening again, " Balls said, referring to the rise in yields last autumn.
"Both the Democrats and the Republicans seem unconcerned about the level of the fiscal deficit...It does seem likely that without having something exciting happening [like the UK's 2022 gilts crisis] you could have a slow grind to higher term premia."
Balls said his preferred places to have exposure to bonds more sensitive to changes in interest rates were in the UK, Australia, New Zealand and Canada. In December the FT reported that Pimco's chief investment officer believed the UK was at risk of a serious economic downturn and that he had been running larger than usual bets on gilts.
Last week the BoE kept rates at 5.25 per cent for a fifth consecutive meeting, as widely expected. However, in a surprise to markets, the two most hawkish rate-setters on the monetary policy committee fell in line with the majority and voted to keep rates on hold, while one member voted for a cut.
BoE governor Andrew Bailey told the FT last week that markets are right to expect more than one rate cut this year and he was increasingly confident inflation was heading towards target.
Balls said his funds had a larger than normal position in gilts and he was not worried about a potential borrowing splurge ahead of a general election. In contrast, in 2019 he warned that a post-election borrowing binge promised by all major political parties could add to pressure on prices.
"I think both sides will have very similar fiscal policy and in the post [former prime minister] Liz Truss environment we tend to expect the UK to be very orthodox in terms of fiscal policy," he said, referring to the 2022 gilts crisis triggered by an announced 45bn of unfunded tax cuts.
India's stock markets are expected to power on if Narendra Modi wins a third electoral victory this year, even as investors grow fearful that the index gains are built on stretched valuations.
The country's enviable economic performance, which has underpinned strong corporate earnings, and political stability under the prime minister are fuelling bullish sentiment among investors , with the IMF forecasting India will grow at 6.5 per cent this year and next.
The BSE Sensex index hit a record high this month, having risen every year since 2016, while the total value of its equity market has now eclipsed Hong Kong . Some analysts see no reason why years of market gains should not continue.
"India has the best long-term growth prospects in the region, the corporate sector has demonstrated an ability to translate strong economic growth into earnings and stock market returns," said Sunil Koul, Asia-Pacific equity strategist at Goldman Sachs.
But after years of gains, some analysts are growing cautious about the lofty valuations. Among large-caps, a flood of new money is pushing up the share prices of companies with very low free-floats. Meanwhile, regulators are clamping down on trading in smaller stocks, with some drawing parallels with the US's 2021 meme stock craze.
For now few see clouds on the horizon. Modi, India's most popular leader in decades, is widely expected to cement a third term in power following national elections being held between April and June.
Many investors have welcomed the prospect of political stability they believe another Modi term brings. Political opposition is in disarray. The Indian National Congress, the biggest bloc contesting Modi's ruling Bharatiya Janata party, complained it has been unable to campaign after its bank accounts were frozen this month while another prominent leader was arrested .
Modi's government is ushering in manufacturing investment as companies seek to diversify supply chains outside of China, while India's physical and digital infrastructure has also improved. New Delhi has also benefited from the continued import of cheap Russian crude without sanctions thanks to its courtship of western governments.
The MSCI India index has advanced 141 per cent in the years since Modi was elected prime minister in 2014, dwarfing the 9.4 per cent climb of the MSCI Emerging Market index in the same period. Most of the gains have come in the years after the coronavirus pandemic hit financial markets. Goldman expects a 15 per cent compound annual growth rate for Indian earnings through 2025 that "should drive markets higher".
Analysts said there was likely to be further inflow of money into India's equity market from domestic pension funds and overseas investors.
Aditya Suresh, head of India equity research at Macquarie Capital, pointed out overall membership of Indian pension funds had climbed nearly 10-fold in the past five years.
"While a third term for the current government is already priced into expectations, after a formal result we expect to see incremental foreign institutional investor inflows," he said.
But for all the excitement over India's long-term economic performance, investors are growing nervous about whether the stock market rally is sustainable.
The MSCI India is trading at a forward price-to-earnings multiple for 2024 of 23 times, compared with 12.5 times for the broader emerging market index.
Earlier this month investment bank Jefferies held its annual Asia forum in Hong Kong. Following conversations with foreign portfolio investors, their analysts wrote that many fund managers "continue to grapple" with a market at "high multiples".
Kamil Dimmich, a partner at London-based North of South Capital, said his emerging markets fund has not held Indian stocks for about two years following the "insane jump" after the coronavirus pandemic.
India "is not as liquid as one might think for such a big country...free-floats tend to be quite limited because you have these promoters", he said, referring to India's controlling founders and families.
"So when you get big, big foreign and domestic retail inflows it can drive the market up and of course that has resulted in this very high premium level," he added.
India's market regulator also stepped in to calm heated activity in smaller stocks, after both the S&P BSE small-cap and mid-cap indices rose 60 per cent in the past year.
The Securities and Exchange Board of India in late February requested Indian mutual funds find ways to slow the flow of funds into smaller stocks and protect investors from a wave of redemptions, sparking a sell-off and prompting concerns over a market downturn.
"The kind of best comparison would be the meme stocks and GameStop...it's just retail-buying frenzies," said Dimmich, who added that any deeper disappointments in India's rosy economic picture or an adverse election result for Modi could result in a wider and protracted market underperformance.
"There's no real valuation arguments to push the market," he said. "It has to be driven by growth, growth, lots of growth and that's always a little bit scary when your base case is the blue sky case."
The clampdown has begun to cool enthusiasm at the smaller end of the market. The S&P BSE small-cap index is down 4.9 per cent month to date.
Shrikant Chouhan, head of equity research at Kotak Securities in Mumbai, said investors' focus will now "start shifting into large-cap companies". The benchmark Nifty 50, which covers India's largest stocks, may hit 25,000 or a 13 per cent upside from current levels in the next 12 to 18 months, he said, even though it had risen 235 per cent over the past decade.
Even if India is hit by short-term shocks, few other markets offer the same multi-decade structural growth stories, according to Siddharth Mehta, founder and chief investment officer at Bay Capital, a London-based fund focused on Indian equities.
"The pace of change, the pace of flow may ebb and change, but the direction of travel is pretty obvious," he said. "As a result of that there is a premium to come to India and I think the premium is justified in my opinion, I don't see that narrowing anytime soon."
An unusual calm enveloping foreign exchange markets is extending the life of a lucrative trade beyond what many had expected.
The so-called carry trade, which involves borrowing in a low interest-rate currency to invest in a higher-yielding currency, had been expected to fade as major central banks pivot away from hiking rates toward easing policy.
However, a major shift has yet to happen, keeping currency markets calm and the trade, which relies on such stability, an easy winner.
"The carry trade is often known as picking up nickels in front of steam rollers, but speculators have been picking up bundles of $100 bills over the last year," said Karl Schamotta, chief market strategist at payments company Corpay.
"The returns are outstripping virtually everything else."
The strategy provided bumper returns for those who played it right, a Corpay Global Payments analysis showed. Buyers of the high-yielding Mexican peso who sold the Japanese yen would have reaped gains of about 44 per cent over the last 12 months. Other popular carry currencies have also yielded similarly outsized returns.
A Deutsche Bank index, with elements that include the carry performance of 21 emerging market currencies, rose 6.6 per cent in 2023, its best year since 2017. The DB EM FC Equally Weighted Total Return index, as it is called, has climbed nearly 1 per cent over the last month.
The tide may be turning, however. Retreating inflation in emerging markets paves the way for central banks to ease policy in 2024, narrowing the rate difference between the highest- and lowest-yielding currencies.
Mexico recently joined Brazil, Chile and Colombia in cutting rates, easing for the first time since it began tightening in mid-2021.
"The carry trade is likely to run out of steam and while these currencies could see some further gains, those tailwinds that propelled them to large gains in 2023 look to have run their course," said Jonathan Petersen, senior markets economist at Capital Economics.
Last week, Fed policymakers indicated they still expect to reduce rates by three-quarters of a percentage point by the end of 2024. However, the Fed and the European Central Bank are unlikely to match the scale and speed of easing in emerging markets.
Carry traders need to be more picky as a result, said Aaron Hurd, senior portfolio manager, currency, at State Street Global Advisors.
"It's not quite an all clear environment that you had over the past year and a half," he said. "We're generally moving in the direction of being more cautious ..., trying to take the higher quality or lower-risk carry trades now."
Hurd is shifting from using the yen as a funding currency, saying it is vulnerable to a sharp move, toward the stable Swiss franc. He favors buying the Indian rupee while selling the Chinese yuan.
VOLATILITY IS KEY
Central banks moving in sync has helped to curb interest rate volatility. Deutsche Bank's CVIX index, a weighted average of expected volatility in nine major currency pairs, recently sank to a near 2-1/2 year low.
That means investors are not ready to abandon carry trades soon.
"I think markets expected January or February to be more volatile months, where we would have seen a decline in U.S. data that would have warranted maybe Fed rate cuts already in March or in May," said Francesco Pesole, forex strategist at ING in London. Instead, there were two months of strong U.S. data, he noted.
"We can definitely see another few weeks where carry remains relatively popular," Pesole said.
Despite notable interest rate moves in the last few weeks, including a surprise a cut by the Swiss National Bank and the Bank of Japan's long-awaited move away from negative interest rates, volatility has stayed low.
Three-month dollar/yen implied volatility, a measure of the cost of options contracts that traders use to hedge positions, is near its lowest in about three months.
However, it would not take much to roil markets and unsettle the carry trade, analysts said.
"It's really hard to imagine things getting even calmer in FX markets," Capital Economics' Petersen said.
Surprises could come from central bank policy actions, economic data, geopolitical upheavals and elections around the world this year, including in the U.S., he noted.
"The bottom line is that the bar is very low for volatility to creep higher from here."
As South Korea seeks to boost the global profile of its financial markets, the export powerhouse is struggling to loosen the tight currency restrictions that have for years been a major pain point for investors and traders in the country.
Asia's fourth-largest economy is one of the world's most advanced by many metrics but has been unable to shake its classification as an emerging market due to a host of issues, including the way its currency is managed.
While foreign exchange regulators are now considering modest steps to make the won more global, such as extending trading hours, memories of bruising foreign exchange crises cast a long shadow over reforms.
For many firms and market participants, South Korea's arcane restrictions on cross-border transactions, daily reporting requirements and broker rules make doing business slow and costly.
"Having FX markets open almost all day around the clock will certainly help us to better plan currency conversions, and get a better deal," said Bongju Kang, chief financial manager at a small plastic materials exporter. "Currently we negotiate the exchange rate with a local banker the moment we see a good quote, or sometimes hours in advance, especially when the size of the deal is big."
The FX restrictions are among factors often blamed for the so-called Korea Discount, the term given to the global underperformance of local stocks. Other issues include poor decision making and weak governance by major conglomerates.
Regulators say thorough FX market surveillance is still needed to prevent destabilising currency swings.
"We need to monitor the market in times of volatility as liquidity isn't always that ample in the onshore market," a Bank of Korea official said.
Shin Joong-beom, head of the finance ministry's International Finance Bureau, said regulators will maintain the current monitoring system and "stand ready to quickly capture and respond to any disturbing market behaviour".
Up until last year, the won could only be directly exchanged with the dollar or the Chinese yuan among a total of 56 financial institutions based in the country for just six-and-a-half hours a day, through authorised brokers in Seoul.
That meant higher costs for companies, as they must rely on derivatives contracts known as non-deliverable forwards to manage exposure to the won outside the 0900 to 1530 onshore trading window.
From July, South Korea will extend trading to 0200 to cover London hours and the country expects wider foreign participation with about 20 foreign banks applying to join the interbank market, according to the finance ministry.
Those changes come amid President Yoon Suk-yeol's broader reforms to eliminate the Korea Discount and lift investment by getting the country into top-shelf indexes such as the FTSE World Government Bond Index (WGBI) and MSCI's developed market benchmarks. WGBI inclusion could attract inflows of as much as $70 billion, by some estimates.
However, growing political appetite for reform has yet to translate into change that will meaningfully boost won trade, analysts and market participants say.
"With international banks permitted only partial access to Korea's interbank market and no plans for an offshore market on the horizon, we don't expect the accessibility of Korea's financial market to materially change from the wider trading hours," said Simon Harvey, head of FX analysis at Monex Europe.
BIGGER THAN THE POUND?
The $66 billion-a-day won trade makes up around 1 per cent of global forex volume, below 3 per cent for the Canadian dollar and 6 per cent for British pound, according to Bank of International Settlements data from 2022.
That keeps South Korea in the emerging market club, as won trading volumes relative to GDP remained around 8 per cent, similar to Polish zloty and Chilean peso.
"There is no reason why the won cannot overtake the British pound if the forex rules are relaxed enough to give the market a chance to catch up with global exporters we have today," said Kim Hee-jin, head of trading at Shinhan Bank.
Unlike the Hong Kong dollar or pound, foreign banks must trade the won through the two Korean brokerages for spot trading and pay commission to a local bank to fulfil reporting obligations to authorities.
Foreign banks are also not allowed to directly trade the won between themselves offshore.
The heavy focus on market surveillance in part reflects a hyper-vigilant mindset forged after financial traumas such as the 1997 Asian Financial Crisis and the 2008 Global Financial Crisis.
Currently, the BOK can look into every dollar-won transaction through brokers, a system set up decades ago to avoid a repeat of the capital flight seen in 1997, when the won lost half of its value.
"Rules imposed on the won trading are really quite unheard of anywhere," said a dealer with decades of experience at global banks, who declined to be named.
"Korea is opening the market, but it doesn't mean everyone can join and trade the won."
Beijing has vowed to seize "strategic opportunities" and further raise its "international influence, appeal and power" to shape a rapidly changing world by strengthening Communist Party control of foreign affairs and standing firm against "bullying" and "hegemonism" from the West.
At a rare closed-door party meeting about China's future foreign policy direction that concluded on Thursday (Dec 28), President Xi Jinping also urged the country's diplomats and cadres to "break new ground", "rally the overwhelming majority" of the world and adhere to the "fighting spirit".
The two-day Central Conference on Foreign Affairs Work, which was last held in 2018, was attended by top party leaders such as Politburo members, senior government officials and diplomats, including dozens of Chinese ambassadors, state media reported.
Pundits believe the timing of the meeting is of particular significance amid growing signs of socio-economic headwinds at home and growing international scrutiny and resistance, despite Beijing's recent efforts to dial down its rancorous rivalry with the US-led West.
In his speech, Xi touted China as a "responsible" global power rising under his head-of-state diplomacy since he took power in 2012 and said China had overcome "various difficulties and challenges" in its external work in the past decade.
But he also warned of "high winds and choppy waters" ahead because the world had "entered a new period of turbulence and transformation" a thinly veiled reference to Beijing's feud with the US and its allies over ideological and geopolitical differences.
"China has become a responsible major country with enhanced international influence, stronger capacity to steer new endeavours and greater moral appeal," he declared, according to a readout by Xinhua.
"We have showcased distinct Chinese characteristics, style and ethos in our diplomacy, and established the image of a confident, self-reliant, open and inclusive major country with a global vision."
China had taken "a holistic approach to our relations with all parties", "expanded a comprehensive strategic layout and formed a wide-ranging, high-quality global network of partnerships," he said.
Xi also hailed the Belt and Road Initiative , his signature foreign policy and outbound investment project, as "the world's most broad-based and largest platform for international cooperation", and said Beijing had "shown the way in reforming the international system and order".
The meeting came on the heels of Xi's remarks on Tuesday hailing Mao Zedong's legacy and vowing "to build China into a stronger country and rejuvenate the Chinese nation on all fronts by pursuing Chinese modernisation".
Xi, who has become China's most powerful leader since Mao after securing a third leadership term last year, also pledged on Tuesday that "the motherland must and is bound to be reunited", just days ahead of the presidential election in the self-ruled Taiwan .
When President Xi Jinping gave his speech before kicking off his norm-breaking third term in March, he vowed to lead China through a "turbulent decade" and to sail the country through "dangerous storms" ahead.
But more than five months in, having been given unanimous support by the national legislature after the presidential term limit was scrapped to extend his unprecedented tenure, the country is in deeper unchartered waters.
On the international front, China has been engaged in an all-encompassing competition with the United States in areas from trade and tech to security.
This has spilled over to having other developed economies call for so-called de-risking in their supply chains, further hindering China's aim to become a top global exporter and tech power.
And on the domestic front, there is a new backdrop. China's domestic economy is struggling to recover, and structural problems are becoming ever more apparent than at any point over the last decade of Xi's rule.
This all could, analysts said, culminate in a defining moment for Xi. Hailed as China's "helmsman" and "navigator" by state media and his political aides, Xi has a chance to shape his legacy during another five-year term.
"Xi is facing challenges on multiple fronts, and they are interconnected," said Yeling Tan, a Chinese politics professor at the University of Oregon.
"US-China competition raises business risks and therefore weakens economic prospects, while national security challenges also require policymakers to balance security and economic considerations rather than focusing their full attention on any single priority, such as economic recovery."
Apple has told India its local production targets will be hit if New Delhi follows the European Union and requires existing iPhones to have universal charging ports, a government document shows as the U.S. tech giant lobbies for an exemption or delay.
India wants to implement a European Union rule that will require smartphones to have a universal USB-C charging port, and has been in talks with manufacturers about introducing the requirement in India by June 2025, six months after the deadline in the EU. While all manufacturers including Samsung have agreed to India's plan, Apple is pushing back.
Apple has for years offered a unique lightning connector port on its iPhones. The EU, however, estimates a single charger solution would save about $271 million for consumers, and India has said the move will reduce e-waste and help users.
In a closed-door Nov. 28 meeting chaired by India's IT ministry, Apple asked officials to exempt existing iPhone models from the rules, warning it will otherwise struggle to meet production targets set under India's production-linked incentive (PLI) scheme, according to the meeting minutes seen by Reuters.
PLI is a key project of Prime Minister Narendra Modi and offers electronic manufacturers in India fiscal incentives for fresh investments and incremental phone sales each year. It has been extensively used by Apple suppliers like Foxconn to expand iPhone manufacturing in the country.
"If the regulation is implemented on earlier models of mobile phones, they (Apple) will not be able to meet the PLI targets," the minutes quoted Apple's regulatory and product compliance executives as saying while opposing the rules.
Apple did not quantify the production impact in the meeting, and the IT ministry decided to review its request and reach a decision later, two people familiar with the discussions said.
Apple, whose India lobbying efforts are being reported for the first time, and India's IT ministry, did not respond to Reuters requests for comment.
DESIGN CAN'T CHANGE
India is seen as Apple's next growth frontier after China.
Renowned Apple analyst Ming-Chi Kuo has estimated 12-14 per cent of iPhone production in 2023 will be from India, with the number set to rise to as much as 25 per cent next year.
In terms of market share, Apple accounts for 6 per cent of India's booming smartphone market, compared with just about 2 per cent four years ago. Apple suppliers have expanded their facilities and make most iPhone 12, 13, 14 and 15 models in India for local sales and exports, Counterpoint Research estimates.
Only iPhone 15 has the new universal charging port. Apple told Indian officials in the meeting that the "design of the earlier products cannot be changed," the document showed.
Consumers in India's price-conscious market prefer buying older models of iPhones which typically become cheaper with new launches, and India's push for the common charger on older models could hit Apple's targets, said Prabhu Ram, head of the Industry Intelligence Group at CyberMedia Research.
"Apple's fortunes in India have primarily been tied to older generation iPhones," he said.
The EU's charging port rules kick in in December 2024, and India wants compliance by June 2025.
Apple told officials it can comply with that timeline if existing models are exempted from the rules, but will need 18 months beyond 2024 if they are not.
"A natural transition period should be given ... keeping in mind the product design timelines," the minutes quoted Apple executives as telling government officials.
Last year, India had plenty to celebrate. Apple opened its first flagship store in the country and shifted a chunk of its manufacturing from China to India as well. And it was joined by many other companies. United States-based Micron Technology agreed to build a US$2.75 billion (S$3.7 billion) semiconductor facility in Gujarat state, with Micron spending up to US$825 million and India funding the rest.
US-based Applied Materials announced it will build a collaborative engineering centre in Bengaluru, with an investment of US$400 million. Another semiconductor firm, Lam Research, will start a training programme for 60,000 Indian engineers.
Taiwan-based Foxconn, the world's largest contract manufacturer of electronics, said it will double its workforce and investment in India by this year.
China's Xiaomi has told New Delhi that smartphone component suppliers are wary about setting up operations in India amid heavy scrutiny of Chinese companies by the government, according to a letter and a source with direct knowledge of the matter.
Xiaomi, which has the biggest share in India's smartphone market at 18 per cent, also asks in the letter dated Feb 6 that India consider offering manufacturing incentives and lowering import tariffs for certain smartphone components.
The Chinese company assembles smartphones in India with mostly local components and the rest imported from China and elsewhere. The letter is Xiaomi's response to a query from India's information technology ministry asking how New Delhi can further develop the country's component manufacturing sector.
India ramped up scrutiny of Chinese businesses after a 2020 border clash between the two countries killed at least 20 Indian soldiers and four from China, disrupting investment plans of big Chinese companies and drawing repeated protests from Beijing.
While Chinese companies operating in India are reticent to speak publicly about the scrutiny, Xiaomi's letter shows that they continue to struggle in India, especially in the smartphone space where many critical components come from Chinese suppliers.
In the letter, Xiaomi India President Muralikrishnan B said India needed to work on "confidence building" measures to encourage component suppliers to set up operations locally.
"There are apprehensions among component suppliers regarding establishing operations in India, stemming from the challenges faced by companies in India, particularly from Chinese origin," Muralikrishnan said, without naming any companies.
The letter said the concerns were related to compliance and visa issues that it didn't elaborate on, and other factors. It said "the government should address these concerns and work to instil confidence among foreign component suppliers, encouraging them to set up manufacturing facilities in India".
Xiaomi and the IT ministry did not respond to queries for further information and comment.
Indian authorities last year accused Chinese smartphone company Vivo Communication Technology of breaching some visa rules and alleged it siphoned US$13 billion in funds from India.
India has also frozen more than US$600 million in Xiaomi assets for alleged illegal remittances to foreign entities by passing them off as royalty payments.
Both Chinese companies deny any wrongdoing.
Other than regulatory scrutiny of the likes of Xiaomi and Vivo, India has since 2020 also banned more than 300 Chinese apps, including ByteDance's TikTok, and halted planned projects such as those planned by Chinese automakers BYD and Great Wall Motor.
The source said many executives of Chinese electronics companies struggle to get visas to enter India, and their companies continue to face slow clearances for investments due to heavy scrutiny by New Delhi.
In the letter, Xiaomi's Muralikrishnan also made a case for further lowering India's import tariffs, just after New Delhi's Jan 31 move to reduce import taxes on battery covers and phone camera lenses.
Xiaomi is also asking India to reduce import tariffs on sub-components used in batteries, USB cables and phone covers, according to the letter.
Reducing the import tariffs could "increase India's manufacturing competitiveness ... in terms of costs", Xiaomi said in the letter, but getting component manufacturers to set up shop in India would require bigger incentives.
In January, India's top industrial policy bureaucrat Rajesh Kumar Singh signalled that India could ease its heightened scrutiny of Chinese investments if the two countries' border remains peaceful.
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