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Mint
10 hours ago
- Business
- Mint
Rahul Jacob: Manufacturing is crying out for a reality check
In a world of wildly exaggerated claims for artificial intelligence (AI), the paradox is that the mythology which leads governments to favour manufacturing over services often seems like a global religion. US commerce secretary Howard Lutnick was quoted a few months ago fantasizing that 'the army of millions and millions of human beings screwing in little, little screws to make iPhones" would soon move back to the US. Hardly a fortnight goes by without New Delhi and indeed governments overseas announcing some new incentive for manufacturing. In India's case, this is usually via the production-linked incentive (PLI) scheme. Also Read: Think ahead: India's electronics manufacturing must go up the value curve China led the way a decade ago and provoked a similarly mercantilist pushback from the West. Kicking off its 'Made in China' scheme for the manufacturing domination of a swathe of high-tech sectors, Beijing declared 'the history of the rise and fall of nations has repeatedly proved that without a strong manufacturing industry, there will be no country and no nation." Beijing's melodramatic declaration underlined what is best described as manufacturing machismo, evident also in the Donald Trump administration's obsession with trade deficits faced by the US in manufactured goods. For all of China's success in electric batteries and vehicles, the European Union Chamber of Commerce in China last week pointed out that in electric vehicles, for instance, only three of 112 manufacturers are making a profit. Perhaps only communist accounting principles would allow such distortions. Also Read: Time to re-imagine Indian manufacturing from the ground up At a time when Beijing is seeking to boost its domestic economy because of uncertainty over trade with the US, the risk is that Beijing's issuances of new bonds will be used for servicing debt rather than boosting consumption or starting new production. Already, massive over-production means that China's deflation in producer prices has got entrenched. And its strategy of dumping goods in foreign markets is being ratcheted up to a new level. This week, BCA Economic Research in Jakarta observed of Indonesia's 22% increase in imports in April that this 'surge originated from Singapore (+48% year-on-year) and China (+54% year-on-year), indicating either potential trans-shipment activity or dumping of excess inventory." The supreme irony is that we live in an era in which manufacturing produces fewer and fewer jobs in factories because of the increasing use of robots. China has been among the world leaders in making robots and using them. Fifteen years ago, I used to joke that I was the 'factories correspondent' for the Financial Times because so much of my work in Guangdong involved visits to factories, which accounted for a dominant share of global production in industries such as light bulbs, knitwear and smartphone accessories. Even then, amid a push by the provincial government to raise factory wages by double-digit levels in Guangdong, I was surprised to see Hong Kong firms using robots in industries such as garment manufacturing. On a visit to a Ford plant in India at Sanand, Gujarat, a few years later, I saw far fewer workers on the factory floor than I expected and plenty of robots. Also Read: How a manufacturing boom could help India close the gender gap The most recent figures from the International Federation of Robotics released in November 2024 show that South Korea leads the way with 1,012 robots per 10,000 employees. China is third with 470 robots for every 10,000 workers. An obsession with manufacturing jobs is thus myopic because automation is a principal leitmotif of new factories. 'We are now in a tech race over the software and machines that will power manufacturing, more than the manufacturing itself," Joe Leahy, China bureau chief for the Financial Times and co-author of a recent article on 'Made in China,' told me. Electric vehicle plants, he observes, look like 'power stations" because there are so few humans on site. India does not figure in the world's top 20 nations for robot density. Yet, at the same time, as Raghuram Rajan has pointed out, we are a global player in making software for the design of semiconductor chips. A peculiarity of New Delhi's obsession with manufacturing over several decades is that it trumpets successes in capital intensive manufacturing while treating labour-intensive industries, such as garments and tourism that produce thousands of jobs, as stepchildren. Garments deserve priority in free trade agreements. So too does visa-free access to India for tourists from rich countries. Also Read: India can leap from cost competitiveness to innovation-led manufacturing Another oddity is that India's success in attracting global capability centres rarely dominates headlines or policy discussions. It routinely shows up in our export data: service exports jumped a staggering 45% year-on-year in the fourth quarter and boosted our GDP for that quarter, as announced last week. Also in the news is that our 'Make in India' scheme for solar modules is running well behind schedule. Moneycontrol reported that solar module capacities are running at a fifth of what the PLI scheme envisioned would be onstream by April 2026. Part of the problem is that visas for Chinese advisors and technicians have proved problematic. If Beijing is content to subsidize our solar panels, we should let it. We seem dependent on China in this industry in any case and our bilateral trade deficit is at record levels anyway. Even amid the fog of manufacturing myopia, it ought to be obvious that India has a comparative advantage in sunshine. The author is a Mint columnist and a former Financial Times foreign correspondent.
Epoch Times
3 days ago
- Business
- Epoch Times
Confidence of EU Companies in China Drops to Historic Low: Survey
The confidence of European companies operating in China has dropped to a record low, according to an annual survey, with respondents citing China's economic downturn and rising geopolitical tensions. In the European Union Chamber of Commerce in China's 2025 Business Confidence Survey published on May 28, a record 73 percent of the 503 respondents said that it's more difficult to do business in China. The survey of 503 chamber members was conducted in January and February, which was before the tariff war escalated in April.
Time of India
4 days ago
- Business
- Time of India
Charting the global economy: US GDP falls on larger trade hit
The US economy contracted slightly to start the year, largely reflecting a bigger tariff-related trade hit but also a larger downshift in household spending growth than first estimated. In contrast, an export surge help drive the Canadian economy in the first quarter as businesses accelerated shipments ahead of higher US duties. Gross domestic product in India rose at a stronger-than-forecast 7.4% pace. Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy , markets and geopolitics: US & Canada Bloomberg The US economy shrank at the start of the year, restrained by weaker consumer spending and an even bigger impact from trade than initially reported. The economy's primary growth engine — consumer spending — advanced 1.2%, down from an initial estimate of 1.8% and the weakest pace in almost two years. Meantime, net exports subtracted nearly 5 percentage points from the GDP calculation, slightly more than the first projection and the largest on record. Bloomberg A strong jump in tariff-driven exports fueled Canada's growth at the start of this year, offsetting domestic weakness in other parts of the economy. Preliminary data also suggests some continued momentum at the start of the second quarter, with output rising 0.1% in April, led by mining, oil and gas, and finance industries. Bloomberg Consumer sentiment rebounded in late May from one of the lowest readings on record earlier in the month and long-term inflation expectations retreated as concerns about the economy eased after the rollback of China tariffs. Live Events Bloomberg In the wake of Nvidia Corp.'s latest earnings report and upbeat sales forecast, the US government's GDP report also underscored the locomotive power of the artificial intelligence boom. Business investment in computers and other information processing equipment contributed a record 1.01 percentage points to first-quarter GDP. Europe Bloomberg European firms in China are the most pessimistic about growth prospects since 2011, underscoring the challenges of doing business in the world's second-largest economy despite recent government efforts to address some complaints. Some 29% of respondents were downbeat on the outlook for their sector over the next two years, according to an annual report by the European Union Chamber of Commerce in China. Bloomberg Germany's inflation rate dropped to 2.1% in May, slowing less than expected and highlighting lingering risks as the European Central Bank prepares to cut rates again. The data follow reports from Italy and Spain, where inflation eased to just below 2%, supporting the case for borrowing costs to be lowered further. Meanwhile, France said consumer price rose just 0.6% from the previous year. Bloomberg Europe is gradually adding gas to its depleted storage sites despite seasonal works at production facilities across the globe. In addition, overall demand for liquefied natural gas in Asia remains weak, which is a relief for European buyers that compete for the same fuel. Asia Bloomberg For decades, Asia's export powerhouses had a simple financial strategy: Sell goods to the US, then invest the proceeds in American assets. That model is now facing its biggest threat since the 2008 global financial crisis as Donald Trump tries to remake global trade and the US economy — upending the logic behind $7.5 trillion of investments from Asia. Some of the world's biggest money managers say an unwind is just getting started. Bloomberg India's economy grew at a faster pace than analysts expected, driven by some pick up agricultural activity and investments. While India retains its title as the world's fastest-growing major economy, the annual growth rate marks a notable slowdown from the 8% average seen in recent years — the pace needed by Prime Minister Narendra Modi to achieve his ambitious goal of making the country a developed nation by 2047. Emerging Markets Bloomberg Brazil's consumer prices rose less than forecast in early May, fueling bets that the central bank will halt its cycle of interest rate hikes while keeping its monetary policy restrictive going forward to tame inflation. World Bloomberg Japan lost its position as the world's largest creditor nation for the first time in 34 years, giving up the title to Germany despite posting a record amount of overseas assets. Japan's status as the world's biggest net-creditor nation was a consequence of decades of current account surpluses that saw Japanese investors and companies load up on holdings abroad. Bloomberg New Zealand lowered rates for sixth straight meeting. South Africa, the Bank of Korea, Mozambique and Eswatini also cut. Hungary, Israel, Uruguay, Guatemala and Tunisia kept borrowing costs unchanged.
Time of India
7 days ago
- Business
- Time of India
China may relax rare earth export curbs for some chip companies
China may relax curbs on exports of rare earths for Chinese and European semiconductor firms and other companies in their supply chain, state media said on Wednesday. In April, China put seven rare earths and related products on an export control list, forcing all exporters to apply for licences, regardless of the nationality of overseas customers. While a few licences have since been granted to exporters of rare earth magnets , used in the semiconductor, auto and defence industries, the complex licensing process can take months, and is already causing confusion at customs. On Wednesday, the official China Daily said China could relax the controls for the supply chains of Chinese and European semiconductor companies, citing a single source. The rare earth controls were discussed at a meeting between Chinese and European semiconductor firms hosted by China's commerce ministry on Tuesday, the paper said, where Chinese officials explained the application process. "The meeting provided European Chamber members the opportunity to express in person the urgent need to accelerate approval processes, to ensure the stability of their supply chains," said Jens Esklund, president of the European Union Chamber of Commerce in China. "This is imperative, as many European production lines will come to a halt very soon due to the shortage of crucial inputs," he added in a statement to Reuters.
Japan Today
7 days ago
- Business
- Japan Today
European companies cut costs, scale back investments in China as its economy slows
By KEN MORITSUGU European companies are cutting costs and scaling back investment plans in China as its economy slows and fierce competition drives down prices, according to an annual survey released Wednesday. Their challenges reflect broader ones faced by a Chinese economy hobbled by a prolonged real estate crisis that has hurt consumer spending. Beijing also faces growing pushback from Europe and the United States over surging exports. 'The picture has deteriorated across many key metrics,' the European Union Chamber of Commerce in China said in the introduction to its Business Confidence Survey 2025. The same forces that are driving up Chinese exports are depressing the business outlook in the Chinese market. Chinese companies, often enticed by government subsidies, have invested so much in targeted industries such as electric vehicles that factory capacity far outpaces demand. The overcapacity has resulted in fierce price wars that cut into profits and a parallel push by companies into overseas markets. In Europe, that has created fears that growing imports from China could undermine its own factories and the workers they employ. The EU slapped tariffs on Chinese EVs last year, saying China had unfairly subsidized electric vehicle production. 'I think there's a clear perception that the benefits of the bilateral trade and investment relationship are not being distributed in an equitable manner,' Jens Eskelund, the president of the EU Chamber in China, told reporters earlier this week. He applauded efforts by China to boost consumer spending but said the government must also take steps to ensure that supply growth doesn't outpace that in demand. The survey results show that the downward pressure on profits increased over the past year and that a fall in business confidence has yet to bottom out, Eskelund said. About 500 member companies responded to the survey between mid-January to mid-February. 'It is just very difficult for everyone right now in an environment of declining margins,' he said. © Copyright 2025 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.
