they really are keen on annoying investors aren't they. i wonder for how long tencent and the other conglomerates will obey these orders
They will obey as long as the state has power, which will be for the far foreseeable future.
The Chinese government has been smart enhance its power by keeping its domestic businesses in a strictly subordinate position and creating an environment were foreign businesses cooperate because dependence is the best business decision (e.g. Apple has no "plan B," it's China all the way for them).
And it might work out for them, especially if foreign nations continue to complacently indulge in free market Kool-Aid.
I know many people who work, or worked for Apple on the hardware side.
I assure you, Apple has "plan B," and it been trying executing on it relentlessly for the last 2 years — just without any success.
Vietnam's total electronics industry output is like a single district in Dongguan. The supply chain is very, very immature there, despite it already towering above any other place in developing Asia, but China.
If what my buddies tell me of Apple's internal assesment of countries is correct, no other countries are even close to a 2nd place alternative on that, except for Taiwan, which is their "plan C" — a sure to work, but expensive option if everything else fails.
Apple is just doing something wrong is all.
Can you share any details about that?
> If what my buddies tell me of Apple's internal assesment of countries is correct, no other countries are even close to a 2nd place alternative on that, except for Taiwan, which is their "plan C" — a sure to work, but expensive option if everything else fails.
That's actually kind of what I meant by "there's no plan B." They may be able to formulate other plans (B, C, D, etc.) and even spend a little money on them, but Western business-thinking won't let them actually deviate from plan A.
One of China's advantages is that the West puts business in the driver's seat in a lot of situations, but business is short-sighted, selfish, and geopolitically naive, so it is exploitable and controllable with the right methods.
Well, I heard story first hand. It's not a secret to anybody in the Industry too.
Apple been quietly trying to invite its part makers to setup factories in Vietnam, sometimes quite coercively.
Strange question with what I would consider to be an obvious answer. They will obey for as long as they want the profits they get from China's market of video game players for instance. Which strikes me as pretty much "forever".
What company is gonna leave and give that kind of gift wrapped profit center to someone else voluntarily?
The trick for China is to get the regulations in place that are necessary, without putting so many in place that it strangles profitability (and therefore destroys business). But come to think of it, that's the trick for any country when regulating.
When it's no longer a gift.
These companies are sometimes high flying startups along the lines of US firms and they require access to capital.
If their valuations are clipped by an order of magnitude because of regulatory apparatus (i.e. can't list in the US and American investors have no appetite for Chinese exchanges), then this will be a problem for a lot of businesses.
TikTok is getting big in the US and the West where margins are a lot fatter, it could feasibly make more sense for Bytedance to jump ship and become an American-based company with a Chinese workforce. Obviously that's hugely speculative but just an example.
It's like any bit of regulation it has a bunch of externalities. Some may be pretty bad for the company. Maybe, maybe not.
Probably as long as the regulation exists. It is amazing, but once there is the real threat of personal, physical imprisonment, most CEOs are pretty good about making sure regulations get followed despite any impact on the stock price.
Edit: If
2. Even if there were a mass exodus (Which won't happen, because #1), the factories, the expertise, the knowledge base and the human capital those investments paid for aren't going to disappear. All that will happen is that they will become China-owned, as opposed to partially China-owned.
2. Foreigners selling will lead to locals buying. Those firms will simply go from majority-Chinese-owned, to Chinese-owned.
3. Stock markets don't just go up all the time, sometimes they correct.
[1] It does in the United States, but that's because during slumps, the government is very skittish when it comes to creating demand, outside of the MIC. The CCP takes a longer view, and actively prioritizes building up China's industrial base, as opposed to dismantling and offshoring it.
A high stock price prevents a corporate takeover (which is not a real-world-value-destroying activity - factories operated by a company don't burn up when it happens), and it makes it possible for the firm to raise money by selling stock. In a world of low interest rates, and easy credit, this is not very important.
Capable manufacturing doesn’t matter when automation can be reshored, when there are shipping delays and pricing spike, when labor costs are rising fast.
Not sure why we are discussing validity of exodus when public companies have already reported mass exodus of manufacturing from China.
India is not the fastest growing market, either in relative, or absolute terms. The number of globally-middle class people in China far eclipses the number of their counterparts in India. The rate at which people enter the global-middle class is much faster in China. It's possible that one day, India will become the fastest growing market, but that day isn't today, or tomorrow, or next year.
> Capable manufacturing doesn’t matter when automation can be reshored, when there are shipping delays and pricing spike, when labor costs are rising fast.
You simply can't re-shore the ecosystem that arose in Shenzhen. Not without two decades of hemorrhaging money, depending on government handouts, and having a much slower time to market. The labour cost isn't even the problem, there's just no supporting industry in the US that can match the turnaround times/SLAs that vendors in China offer.
It's possible for say, the US to close down its economy, build a wall of tariffs, and only buy local (And thus, eventually, at great cost, rebuild its industry. It's not a bad idea, but the electorate won't stand for it), but those factories in Shenzhen will keep operating, and will pivot towards selling to the middle class of the domestic market, and of the developing world, instead.