Hello, this is Kenji from Hong Kong.
We just had a day off on Wednesday to observe the May Day labor holiday. Many other places in the region also mark the day, but in mainland China, it is the start of a five-day "golden week." The term originated from a long holiday season in Japan at this time of year, though the holidays are for different reasons and fall on different days.
For several thousand mainland-listed companies, their golden week only arrived after they published their annual reports by the April 30 deadline. That made the first half of this week in particular a rush of financial disclosures.
Spending hours going through the ocean of documents, as I have been doing for decades, can feel like a punishment, but there are occasional rewards in the form of news stories to report and leads to follow up on.
Annual reports contain a wealth of corporate information in a specific format and governed under a set of rules. This has extra significance in China, as a majority of mainland-listed companies rarely answer reporters' questions or hold press conferences to discuss their results. And while enforcement depends on the will of the local authorities, listed companies and their management are liable to penalties if they are caught falsifying information in their disclosures.
Some of the stories that we feature this week are the direct result of what we found out about Chinese automakers, rare earth miners and supply chains from listed companies' annual disclosures.
EVs in overdrive
The Beijing International Automotive Exhibition, or Auto China, is back after a four-year hiatus. The show, which runs through most of the golden week break until May 4, has given industry players impetus to announce new models, partnerships and investment plans, both at the exhibition site and outside it. All the while, debate over the country's overcapacity in electric vehicles is heating up.
Tomoko Wakasugi and Shizuka Tanabe, Nikkei reporters covering the event from the ground, focused on local players such as XPeng, Geely and BYD, which revealed new models resembling "AI-powered smartphones on wheels." Cissy Zhou, Nikkei Asia's Hong Kong-based tech reporter, reported on the deepening tie-up between Tesla and Baidu, aimed at allowing the U.S. EV maker to introduce its self-driving system in China by using the Chinese company's mapping and navigation functions.
The flip side of these rapid developments in the industry is arguably overcapacity, which has triggered cutthroat competition and severe price wars at home. One of the apparent side effects is Chinese makers' export drive, and lately, their moves to produce abroad, including in developed markets like Europe. SAIC Motors, the largest Chinese auto exporter, has "initiated a site selecting process for a European auto manufacturing base," according to its latest annual report.
If you can't beat them ... buy from them
First, it was Germany's Volkswagen announcing a series of groundbreaking tie-ups with Chinese tech groups.
Now, Elon Musk's Tesla and the national brands of South Korea and Japan have decided that the only way to survive in the country's cut-throat car market is to buy Chinese-made technology. Foreign carmakers' sales in China -- the world's biggest car market -- have sunk to a record-low market share of 40%.
As the Financial Times' Edward White reported last week from the Beijing auto show, one fact was clear: multinationals believe the only way to catch up with Chinese carmakers, which have prioritized electric vehicles and advanced driving technologies, is to incorporate the tech they use in their own models.
However, amid fears over national security and economic reliance on a country controlled by the Chinese Communist Party, the foreign groups' deepening dependence on Chinese technology will raise questions in their home markets.
A bigger bite of Apple
In contrast to American peers such as Dell and HP, Apple has deepened its relationship with Asia's biggest economy, adding even more China-headquartered companies and manufacturing sites in the country to its list of top suppliers last year.
A deep dive into Apple's annual official supplier list by Nikkei Asia's tech correspondents Cheng Ting-Fang and Lauly Li reveals that the total number of suppliers from China increased to 52 in 2023, up from 48 the year before, maintaining the country's position as the largest source of suppliers for four straight years. There are now 286 manufacturing or development facilities in China, 10 more than the previous year.
But Apple is also making a concerted push to establish supply chains outside of China as well, namely in Southeast Asia and India, amid the ongoing Sino-American tech war.
The balancing act was reflected in CEO Tim Cook's latest trip to the region. He spent a week in China to meet with executives of suppliers and political figures, but later went on to tour Southeast Asian countries, meeting with Vietnamese Prime Minister Pham Minh Chinh, Indonesian President Joko Widodo and Lawrence Wong, Singapore's prime minister-in-waiting.
Ore is less
China remains the biggest global supplier and leading holder of reserves of rare-earth minerals, but the country's miners and refiners may not feel like they are on top of the world, judging by their latest financial results. The listed units of state-backed entities reported falling revenues and profits for the full 2023 year and the first quarter of this year, according to Nikkei Asia's Kenji Kawase.
These companies attribute this to foreign competitors beginning to establish their own rare-earth supply chains, coupled with weak domestic demand.
Shenzhen-listed China Rare Earth Resources and Technology, a core listed arm of state-owned conglomerate China Rare Earth Group, pointed out that "foreign countries are now proactively installing rare-earth supply chains independent from China," highlighting recent moves in the U.S., Australia and Southeast Asia. The company's net profit fell 45.7% in 2023 and turned to a net loss for the first three months of this year.
Beijing has weaponized rare earths from time to time for political purposes, while President Xi Jinping and state leaders have repeatedly and publicly emphasized the sector's importance. China's emphasis on the sector may have strengthened its players, but that has only encouraged other countries to reduce their reliance on China for these critically important tech minerals.
Suggested reads
1. China's spies turn to Europe (FT)
2. Alibaba to build Vietnam data center to follow local storage law (Nikkei Asia)
3. Samsung says latest AI memory chip to go on sale in Q2 (Nikkei Asia)
4. Bob Diamond sets sights on rivalling TikTok with social media start-up (FT)
5. Translation screens a godsend for overseas tourists in Japan (Nikkei Asia)
6. Hong Kong's first crypto ETFs go public in milestone for hub ambitions (Nikkei Asia)
7. China's EV supply chain dominance risks 'collapse' of US subsidies, warns South Korea (FT)
8. US wants allies to cut chip-related China exports amid Huawei alarm (FT)
9. Japan weighs regulating AI developers, following U.S. and EU (Nikkei Asia)
10. Tesla shares surge after Elon Musk secures deal with China's Baidu (FT)
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