1. Tamal Bandopadhyay draws attention to the workforce decline in the banking industry,
In 2005, clerks and subordinates combined had at least 63 per cent share of employees in scheduled commercial banks. By 2021, this figure has more than halved — 30 per cent. A large part of the shrinkage happened in the past decade. Till 2010, clerks and subordinates formed at least 55 per cent of total banking employees. Blame it on technology. As digitisation progresses, more and more jobs of the clerical cadre are turning redundant... As a result of the core banking solution (CBS), customers no longer bank with a branch; they bank with a bank (at any branch across the nation)... The number of branches has gone up by more than one-fourth in the past decade but the number of employees has fallen.
2. FT has a long read which highlights how Taiwan's strategic interests may be coming in the way of America's desire for TSMC to diversify quickly by building facilities in US.
TSMC has grown into a giant with an effective stranglehold on the global chip supply chain. Taiwan sees this dominance as a crucial security guarantee — sometimes referred to as its “silicon shield”. The government believes that the concentration of global semiconductor production in the country ensures the US would come to the rescue if China were to attack. “Everyone needs more advanced [ . . . ] semiconductors,” economy minister Wang Mei-hua said during a visit to Washington this month. Being a key global player in this way will “make Taiwan [ . . . ] safer and [secure] peace”, she added. But Taiwan’s determination to keep as much of the industry as it can on the island is clashing with US strategic goals and its fears of China... As competition between the US and China heats up and the risk of a military conflict over Taiwan increases, Washington is seeking to both cut Beijing off from supplies of key advanced semiconductors and reduce its own dependency on Taiwan for chip supplies. Both of those objectives potentially undermine TSMC, whose success is built on serving customers in all markets and on doing so from a cost-efficient cluster of plants almost entirely in Taiwan.
Its dominance of the market is complete
Taiwan now accounts for 20 per cent of global wafer fabrication capacity, the single largest concentration in one country, and a staggering 92 per cent of capacity for the most advanced chips. The US share in global chip manufacturing has dwindled from 37 per cent in 1990 to 10 per cent in 2020.
3. Another aspect of Japanification is the hollowing out villages and empty houses
Next year, according to a recent estimate, Japan will have roughly 11mn unoccupied residences — slightly more than the entire residential stock of Australia. By 2038, under one scenario in the same forecast, just under a third of Japan’s dwelling units could lie empty. A gloomy prognosis for Japan, where spooky, semi-abandoned rural villages already abound, but a portent of much bigger trouble, potentially, for China. For many economies, Japanification may be a vague worry; where bubbles are concerned there is danger. And there’s a warning klaxon that Japan may now be sounding for China relating to the effect of demographics.
4. Arvind Subramanian makes one of the strongest yet cases on restricting capital flows.
... cross-border flows of private financial capital do not foster sustained economic growth. The substantive benefits from financial globalisation, if any, are too few to offset the costs of sudden shocks, capital flight, and loss of policy control... Developing and emerging-market countries must impose constraints on the cross-border flow of certain forms of capital, particularly volatile portfolio flows. Only “good capital”— for example, foreign direct investment that has a long-term stake in the recipient country and brings technology, skills, and ideas to it — should enjoy the right to move across borders.
Instead of panic-driven capital controls when capital flows reverse, developing countries should eschew the temptation to further liberalise capital flows, especially for short-term gains.
5. After the struggles with overcoming its gas dependency on Russia, Germany grapples with the challenge of derisking its economic fortunes away from China. But Chancellor Olaf Scholz appears as yet not ready to take harsh decisions with the country's China relationship.
The FT writes about the controversy around and tensions created within Germany about the recent purchase of a minority stake in a Hamburg container terminal by a Chinese shipping company Cosco,
Rarely has a deal encountered such strong government opposition. Six German ministries came out last month against Chinese shipping company Cosco’s planned acquisition of a stake in a Hamburg container terminal. But it went through anyway. The man who ensured its safe passage through the German cabinet was Chancellor Olaf Scholz. He insisted on a compromise — Cosco would have to make do with a 25 per cent stake, rather than the 35 per cent that was initially proposed. But the German foreign ministry remained opposed, even after Scholz pushed it through. State secretary Susanne Baumann wrote an angry letter to Scholz’s chief of staff, Wolfgang Schmidt, saying the transaction “disproportionately increases China’s strategic influence over German and European transport infrastructure and Germany’s dependence on China”. Scholz, however, clearly could not afford to see the deal collapse. On Friday he will become the first G7 leader to hold talks in Beijing with Chinese president Xi Jinping since the start of the Covid-19 pandemic. Nixing the Cosco transaction would have cast a long shadow over a trip with huge symbolic importance to both Beijing and Berlin...
The coalition agreement negotiated last year by Scholz’s Social Democrats, the Greens and the liberal Free Democrats was notable for its critical tone on China and its focus on human rights. But the Hamburg deal shows deep divisions persist between the Greens and parts of the SPD about the future of the relationship. Green scepticism about China has only grown since last month’s Communist party congress, during which President Xi stacked the Politburo Standing Committee with loyalists and cemented his position as the most powerful Chinese leader since Mao Zedong... The Ukraine war exposed the folly of Germany’s decades-long reliance on Russian gas. Now, the pessimists fear, it may be about to pick up the tab for its even deeper dependence on China, a country that has long been one of the biggest markets for German machinery, chemicals and cars. Thomas Haldenwang, head of German domestic intelligence, summed up the concern at a hearing in the Bundestag last month. China, he said, presented a much greater threat to German security in the long term than Russia. “Russia is the storm,” he said. “China is climate change.”
Interestingly, even as the smaller companies are tapering down their China operations, it's the bigger ones that appear reluctant, with some like BMW and BASF even expanding operations despite the obvious risks. A clear example of the divergence between national interests and those of multinational corporations.
Scholz's reluctance to bite the bullet with China is surprising since China may be needing Germany more than the other way round given China's deepening rift with the US. The Times writes,
China now makes a very wide range of factory equipment that it used to buy from Germany. Covid lockdowns and a wave of nationalism have also hurt consumer spending on imports in China. At the same time, Germany has gone on buying ever more goods from there. The result is that Germany’s longtime trade surplus with China vanished late last year and has been replaced by a steadily widening deficit. Many German companies now see China as a competitor at home instead of an opportunity abroad. “People always talk about how China is a big market — no, China is a huge economy with a small accessible market,” said Jörg Wuttke, the president of the European Union Chamber of Commerce in China. Overall, E.U. exports to China are only slightly larger than those to Switzerland... President Emmanuel Macron of France had urged Mr. Scholz not to travel to Beijing on his own but as part of a joint delegation. The head of Germany’s foreign intelligence agency warned that the country was “painfully dependent” on China.
6. Even as Germany prevaricates on China, there are signs that Europe may be succeeding faster than expected in weaning itself away from Russian gas. The price at Dutch-based virtual natural gas trading point, TTF, has declined.
Prices remain eye-wateringly high, particularly for early next year, and when the cold weather finally hits there remain concerns Europe could quickly burn through its gas reserves, potentially still leading to extreme tightness in supplies after Christmas. Gas at around €115 per megawatt hour is still equivalent to almost $180 a barrel in oil terms. Contracts in December and January are above $230 a barrel equivalent...But weather’s dominance over the gas market means Henning Gloystein at Eurasia Group is not quite prepared to say the worst is definitely over. If the winter is mild, then Germany, Europe’s biggest economy, could end the season with its storage facilities almost half full. But if it is just slightly colder than normal, then “German gas inventories would be virtually depleted by end-March, possibly requiring late winter rationing or supply cuts”, Gloystein said.
Whatever the final outcome in the months ahead, the European collective resolve to wean away from Russia is succeeding. Germany led this effort. It now needs to lead a similar effort to de-risk from China.
7. Martin Wolf writes about deglobalisation.
Interestingly, rich countries with greater trade integration are associated with lower inequality, pointing to possible gains from trade which benefits the entire economy.
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