Europe Demands China MANUFACTURE LESS But Still Wants Chinese EV Factories & Investment

Europe Demands China MANUFACTURE LESS But Still Wants Chinese EV Factories & Investment

all right guys so let’s talk about China’s trip to Europe so Europe is in a state of confusion now part of them wants to continue trade with China but they trapped in a very bad situation because of the decoupling with Russia cheap energy is over thanks to this European product simply can’t compete with Chinese Goods now Europe sphere is very simple if they keep trading with China allowing all the exports to come in the cheap Goods will crowd out their own domestic Goods in a report it is projected that Chinese cars will comprise a quarter of Europe’s total EV sales because of the quality plus the price point Europe simply can’t compete there’s at least a price advantage of 30% and in some cases over 50% there’s simply no way to bridge the gap if Beijing sells at those prices just after the talks with president shei and macron V lean went on the stand to warn China she said Europe is ready to use all trade tools to punish Beijing it’s basically the fear of Chinese steel and eeve flooding the European market the fear of Chinese Goods winning market share and we must take this quite seriously because there a chance Europe might indeed put up trade barriers to block Chinese Imports obviously this won’t be good for both China and the EU the Chinese need to keep exporting out to grow their Industries hitting their 5% GDP Target isn’t going to be easy at the domestic Market is still recovering China’s exports of cars to Europe are increasing exponentially has gone G from under a billion dollars in 2018 to almost 20 billion in just 5 years in fact it is almost on par with Europe’s own car exports to China the Surplus in Auto Trade Europe is enjoying is about to become a deficit around 40% of Chinese EVS are sold into Europe so losing this trade won’t be good for China what the EU is worried about isn’t really China’s overc capacity it revolves around Europe’s inability to compete if we leave it to free market dynamics it’s obvious which people people would buy the Chinese product would wins hands down the reason why Chinese cars are cheap is because of the entire supply chain not just Factory capacity all the inputs in a Chinese Factory are optimized for lowcost production you have cheap power abundant raw materials Automation and fleshed out Transportation all this contribute to a cheaper price tank but it doesn’t really matter at this point the EU is really afraid and there’s a very good chance they might simply lash out during the press conference V lean revealed the fear she has Europe cannot accept Market distorting practices that could lead to de-industrialization here at home Europe wants China to be less competitive to give EU companies a chance to survive now if China doesn’t play ball Europe might cut away de markets and this is essentially a Mexican standoff things can spiral down to a loose loose situation where the EU Market starts decoupling from China and in return China starts putting up barri against European trade as well listen to what vad had to say about Chinese trade as we have shown we will defend our companies we will defend uh our economies we will never hesitate to do so if this is required Chinese subsidized products these subsidized products such as the electric vehicles or for example steel are flooding the European Market at the same time China continues to massively support it manufacturing sector and this combined with a domestic demand that is not increasing the world cannot absorb China’s Surplus production so she lays it out quite clearly she’s angry that China is massively supporting their manufacturing sector she’s also fears that China’s domestic demand is not improving which is causing these products to flood into Europe but there are some points here we need to make clear subsidies from governments to certain industries are new the us also plays the same game the inflation reduction act for example provides a 30% tax credit for investments in wi solar and other renewable energy projects this is a subsidy to build up their industrial base and to attract investment in as a result within just a year companies P over100 billion do into clean energy manufacturing today the US is increasing their subsidies to bring in companies like tsmc to American Shores now in 2019 studies found that China’s industrial subsidies amounted to over $221 billion that’s 1.7% of China’s GDP in that same year that’s multiple times more than what South Korea and even the US allocates to manufacturing but trying to blame China for your own industrial policy isn’t the way to go this Sudden Change wasn’t an overnight Affair China has been investing for years at a very huge scale the problem the EU has is the lack of coordinated industrial policy for the entire block which really shouldn’t be the case you have the ECB the European Investment Bank the EI and the European commission creating a fund for industrial production shouldn’t be that difficult three years back China was already spending an insane amount of money building the future in total Beijing spent $260 billion to develop renewable energy and their EV sector conversely the biggest EU subsidy came from Germany at only $48 billion there’s a big gap that needs to be filled and this is only for one Financial year there’s a decade of catchup the EU needs to do to compete with China effectively that won’t be easy it will take a lot of time and a lot of money things that Europe simply doesn’t have today and here’s how much money Europe has to spend just to catch up with the US not even China the EU have to spend a bomb 650 billion euros annually until 2030 and for the next decade this we have to hit 800 billion EUR a year however there’s a big problem raising the money today is near impossible without incurring a huge debt burden interest rates are no longer low they are very high Europe is also fighting the Russians by giving Ukraine a lot of money the EU has agreed on 50 billion euros of financial support to Ukraine until 2027 and this is money that could be channeled towards Manufacturing in state as we said before it is impossible to f a war and build your own civilian Industries at the same time the the war is financially hammering yup’s economy and this is becoming more evident when we look at the disparity between EU Industries and China but let’s address the issue of weak domestic demand in China this is a constant issue the US and Europe hammers on to prevent Chinese exports from flooding their markets during her trip to China Janet yelen had a message for Beijing she told officials to change Chinese economic strategy for growth that the industrial push will hurt the US and Europe as well the whole idea here is to get China to focus on boosting domestic consumption to give subsidies directly to households to Spur spending and bring down high household savings rates now these are policies that China is already trying to push that’s the trading program for consumer goods that’s coming the government will give consumers subsidies to upgrade their industrial and household equipment just in cars alone this is expected to generate around 380 billion yuan of demand this year that’s around 53 billion doar in total Gman predicts this will increase GDP growth by 0.6% in 2024 but these are just the estimates there’s no guarantee that a tradeing program will work like a charm trying to boost domestic demand while the property sector is still imploding it’s like trying to swim against the current there’s only so much you can do you have to wait for demand to recover organically Chinese households are still cautious about spending before 2020 China’s savings rate was around 30 to 31% is spiked all the way to nearly 38% when the lockdowns began today it is still above 34% the property collapse is delaying the recovery it’s going to take at least a year or maybe even two years for things to normalize down and during this period China still needs to export their goods to other markets this includes Asia Africa the US and of course Europe as well so something has to give Europe can’t afford to decouple with China while Beijing needs to work out a way forward to keep trading with Europe both sides still need one another thankfully there might be a way out and it’s actually coming from France now while V lean was busy scolding China the French gave a road map and this is probably how China can keep selling to Europe there has to be some give at take for Europe to keep the doors open the French Finance Minister declared France was open to Chinese investment in the EV sector France welcomes all industrial projects byd and the Chinese Auto Industries are very welcome in France in other words you can build your cars in France you can manufacture using EU rules French workers and the energy available in France you can then sell your cars to the common market without restrictions and this might be the playbook for Chinese Goods entering Europe in the future and if you think about it it might be the only way left France wants to build up the economy and China needs the EU Market still as much as Europe wants to decou from China they can’t build affordable EV without Chinese Supply chains Beijing is light years ahead in Mineral refining and Manufacturing it’s all made in China the renewable supply chain is almost completely Chinese over 80% of all inputs are from Beijing poly silicon battery cells cathode and anode are all necessary for the production of EVs and the entire supply chain almost 90% of it comes from China it is impossible to build an EV that can compete in price without China ches inputs France also needs the technology and expertise China can provide and this allows them to catch up with German manufacturing which is still well ahead but does this make sense for China well considering the situation it actually does Chinese companies have more to gain from this partnership as well consider the situation back in China there’s a very brutal price war going on the volumes might be up but profits are actually heading down byd sales are up by 10% in q1 this year how however their gross profit is estimated to decline by 19% the cost of manufacturing the car is so cheap that automakers within China s are slashing prices to get market share it’s great for consumers but painful for the automakers however profit margins for cars sold into Europe are very lucrative byd makes €1,000 in profit selling to the common market versus just 1,300 e selling in China that’s 10 times more profit at least even if they manufacture in France under Eurozone rules the math might make sense China’s very familiar with this playbook in Hungary Chinese companies are investing 10 billion into the country they are building battery plants to supply German automakers and EVS to sell into Europe we could see a bifurcation of markets a splitting of Chinese EV manufacturing one where companies produce cheap star for the local Chinese market made in China for the Chinese people another where cars are built in Europe according to EU standards but sold at a higher price made in Europe for the EU customer this will provide employment to Europe without totally cannibalizing EU automakers now the big Losers of course will be the EU consumer this might seem unfair to China but that might be the only Playbook left and let me put it bluntly to sell into the common market China will have to subsidize Europe’s Industries plain and simple it’s like a bailout for Europe saving them from the bad decisions made over the past 5 or 10 years saving their Industries for the EU spends money fighting Russia and if I was a betting man I believe this is the only way out for EU China trade especially when it comes to EVs and solar panels Chinese factories they have to set up shop in the Euro Zone and this is where China does have the advantage Chinese firms are investing abroad at the fastest Pace in eight years it’s all about building factories to create jobs to keep the doors open for exports and this is simply a meth problem if the economics Works Chinese companies will pour the money into foreign direct investment Chinese investment overseas has reached $130 billion in 2023 and it’s going to grow further this year this is the highest point on record since 2016 trying to flood the world with exports without giving back probably can’t last forever China has to help countries in the world produce staff overseas to grow their own economies the big question now is if Europe will welcome Chinese factories Beyond just France can China invest elsewhere the US has blocked entry into Mexico and there’s a chance that China could face real problems in Europe as well we’ll just have to wait and see but let me know what you think will China build a factory in France can Europe accept Chinese investment coming in let me know in the comments below stay safe be sure to smash the like button and subscribe as we navigate through these crazy times

So Xi Jinping is in Europe and Von Der Leyen has strong words for China’s industry. She has threatened to unleash trade barriers if China doesn’t manufacture less and give EU companies a chance. She is afraid of further de-industrialization of Europe. However, other countries like France, are actively welcoming Chinese money and investments into the country. Here’s what you must know!

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✅ Timestamps & Chapters:
0:00 EU Warns China’s Manufacturing
2:30 Europe Fears De-Industrialization
5:43 Europe’s Is Trapped
8:33 France Wants Chinese Investments
11:46 China To Save Europe?

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