Growth Dragons Weekly: China Dominates in 7 out of 10 Sectors, Companies Ramp Up Acquisitions
Here’s what happened in Growth Dragons this week:
China Dominates in 7 Out of 10 Industries Globally
Tencent’s New Game Caused $8B Selloff in NetEase Stock
TikTok Acquiring Tokopedia to Revive Indonesia e-commerce Business
Li Ning Down 17% After Property Acquisition
Haier Acquiring Carrier’s Commercial Refrigeration Unit
#1 China Dominates in 7 Out of 10 Industries Globally
This week, the Information Technology & Innovation Foundation (ITIF), a non-profit organization, published the Hamilton Index. This index ranks the performance of countries based on their output in ten advanced-technology industries.
In that report, China stood as the leading producer in seven of the ten strategically important industries according to ITIF’s Hamilton Index. In short, China's output surpassed that of any other nation, outpacing the combined output of all other nations outside the top 10.
Over the period from 1995 to 2020, China's share of global advanced industry output surged by 22 percentage points, climbing from 3 percent to an impressive 25 percent. Simultaneously, OECD nations experienced a decline of 27 percentage points, dropping from 85 percent to 58 percent. In essence, China's growth came at the expense of the OECD, showing the prowess and edge that China manufacturing held against other countries.
China's sustained growth in manufacturing and scientific research has allowed it to continually produce frontier products even under challenging conditions. For example, following US sanctions, ChangXin Memory Technologies (CXMT), China’s top dynamic random access memory (DRAM) developer, showcased its design capabilities for gate-all-around (GAA) transistors—the most advanced transistor type for cutting-edge 3-nanometre grade chips at the 69th annual IEEE International Electron Devices Meeting in San Francisco. This highlights China’s ability not only to maintain a dominant position but also to excel in domains it has never explored, even when faced with restrictive trade sanctions imposed by opposing powers.
This report indicates that China, as the world's largest manufacturer and consumer, is too difficult to replace and too entrenched. Furthermore, it is not feasible to completely decouple from China or to entirely rewire the supply chain. Consequently, the focus has shifted towards de-risking. We believe that the majority of global trade, including trade between the US and China, will remain at the status quo and even grow. The US is likely to limit trade in high-end technology to prevent China from catching up. However, such policies will only make China more determined and prompt it to devote more resources to speeding up innovation.