HEADLINES

• Hot topics: What splashes have China’s car industry and EV makers like BYD made in global media? Chips, ASML and China, the storyline keeps evolving. And just unveiled – the most valuable Chinese brands, who are they?
• Ting’s China trip blog – observations, reflections, and pictures
• Events and what also caught our attention

🔥 HOT TOPICS

Chinese car industry, EVs, and BYD

China’s car sector has made quite a few headline news in the first month of 2024.

It broke two records last year – production and sales (both over 30 million units), has overtaken Japan as the world’s top car exporter with full-year exports totalling 5.26 million units valued at about $102 billion, compared to Japan’s 4.3 million units, has become a key growth driver for the Chinese economy, EV sales expanded by 38% to 9.49 million units, accounting for a 31% market share, and most recently found itself facing serious overcapacity.

It may not come as a surprise that the fast-rolling industry ran into an engine trouble. Excess capacity could be between 5 and 10 million vehicles per year, estimates consultancy Automobility, according to Reuters. The Chinese government has pledged to take action to reduce EV makers’ overcapacity. ‘But Chinese carmakers’ foreign road trips could nonetheless motor on,’ analyst Alvin Lau at Canalys, who sees a shift in their strategy as Chinese brands attempt to go global, was quoted by Breakingviews.

Ting Zhang, our Founder & CEO, echoes the view. In a recent visit to BYD HQin Shenzhen, now the largest EV supplier globally,  she witnessed first-hand the company’s strong control in its fully integrated EV supply chain which helps keep their EV cost competitive. In the meantime, BYD’s dedication to continuous R&D, as illustrated through their speed in launching new EV models, enables them to lead the market on functionality too. Finally,  by setting up its own production lines in Hungary, BYD’s advance into European markets as an EV OEM could be unstoppable.

Further reading:

• China’s car industry on a roll as production and sales hit all-time high in 2023
• Understanding China’s electric vehicle industry
• China to prevent superfluous new energy vehicle projects by local governments | Reuters

ASML, chips oversupply worries

Dutch semiconductor giant ASML said U.S. and Dutch export controls on advanced chipmaking machines could take a 10%-15% bite out of its sales to China, which is ASML’s second-largest market and accounts for 29% of the company’s total. Affected products include its mid-range ‘DUV’ lines and a handful of other older tools, ASML announcedin January 2024. ASML sales to China surged despite Dutch and U.S. direct restrictions imposed last year.

Western export restriction means chips made in China are of foundational types widely used in cars, household goods and consumer devices. Author of ‘Chip War’ Chris Miller recently warned that Western nations need a plan for when the oversupply of certain types of semiconductors made in China floods the chip market in 2024. An announcement by China’s top chipmakerSMIC last November about hiking capex to $7.5bn caused overcapacity concerns in the semiconductor industry. The echo lingers on.

‘It is not clear which segments might see overcapacity as there are many types of foundational chips, produced in different fabrication plants, with different materials, by different companies,’ Miller wrote. ‘Nevertheless, the US, European and Japanese governments are all debating potential responses to Chinese chip overcapacity. They face complex trade-offs.’

Further reading:

• ASML expects US, Dutch export rules to hit China sales by 10-15% | Reuters
• China chipmaker SMIC hikes capex to $7.5bn despite profit slump – Nikkei Asia
• Western nations need a plan for when China floods the chip market

Chinese brands: which are the most valuable ones?

Which Chinese brands are the most valuable? The top five in the ranking by brand value are Tencent, Alibaba, Moutai, Douyin and China Mobile, according to Kantar BrandZ Most Valuable Chinese Brands 2023. We can find smartphone maker Huawei (7), Xiaomi (25), home appliance giant Haier (8), and EV maker BYD (27) among the top 50 Chinese global brands.

While most of the brands on the list are considered largely domestic ones, the report noted a key dimension of China’s future stable growth involves greater expansion aboard. ‘The worldwide success of China’s leading auto, home appliances, and IoT brands points toward a near future where the China Top 100 – and the Global Top 100, for that matter – is enriched by the growth of innovative Chinese brands with a vast global footprint.’ BYD is a good example.

Recognition of Chinese brands in overseas markets has been increasing as more Chinese companies join the ‘going abroad’ trend, more investment pours into R$D, innovation, localisation and savvy marketing. The report, jointly compiled by international market research firm Kantar and IT giant Google, surveyed consumers from 11 foreign markets on their opinions about Chinese brands. It revealed that at least 70% of interviewees were willing to consider more than 90% of the 234 Chinese brands participating in the research.

✈️ TING’S FIRST TRIP TO CHINA IN 2024

When the Year of Dragon gets ready to step into centre stage, Crayfish.io Founder and CEO, Ting Zhang, embarked on her first business trip to China in 2024. She shares her experience in visiting Shanghai, Shenzhen, Chengdu and Beijing and reflections on the journey with partners, friends and a wider audience. Judging by the keywords and images of the posts, hers has been a rewarding journey. You can read them here.

🔔 FINALLY…

Join us online (and in person if you can) on Mar 14, 2024

Experts from the UK and China will share insights about UK-China business & investment in healthcare, 2024 and beyond. We will look at the trends, opportunities, challenges, legal matters and best practices. The event is organised by Crayfish.ioin association with KWM and Eversheds Sunderland.

• What opportunities are available in the UK healthcare sector for overseas investors?
• What are Asian investors, especially PE, looking for in the UK?
• And for the Chinese healthcare industry, what does the investment landscape look like?
• How do overseas businesses get there and what they should expect along the way in terms of market conditions, rules and regulations, legal matters, and practicalities?

These and more will be discussed during the one-day event. Details will be published here and on other channels once finalised. Mark the date.

Congratulations to Cambridge Mechatronics Ltd, one of Crayfish’s clients, for a rare accolade of being acknowledged as an Excellent Partner by its Chinese customer, ZET. More details can be found in CML’s WeChat post here.