Growth Dragons Weekly - Jun 2023 #1
In Growth Dragons this week:
Elon Musk's Trip to China Sends Powerful Messages
China told Banks they Could Lower Interest to Spur More Spending and Investments
Alibaba, Tencent, Ping An and HKEX launched RMB counters in Hong Kong
TikTok is After Shopee and Lazada
Elon Musk's Trip to China Sends Powerful Messages
Last week, Elon Musk made a whirlwind 44-hour visit to China, marking his return after a three-year absence. This highly anticipated visit has conveyed several significant signals. Firstly, Musk was granted an audience with Foreign Minister Qin Gang, a privilege not commonly extended to entrepreneurs. This exceptional reception could be attributed to Musk's alignment with China's political stance on the Taiwan issue.
Musk’s statements advocating for peace, not only in the case of Ukraine but also concerning Taiwan, resonate positively with China. This aligns with China's objective of achieving a peaceful reunification, potentially through the application of the One Country, Two Systems model, which has been implemented in Hong Kong and Macau could be extended to Taiwan. China often employs a communication style characterized by high-context language, relying on signals and implicit messaging rather than direct statements. By treating Musk as a messenger or even a representative of the United States, China utilizes this opportunity to convey its message of peaceful reunification. It is evident that this move carries a strong political undertone, highlighting the politicized nature of Qin Gang’s meeting with Musk.
Furthermore, Musk stands to gain significant advantages from forging a closer relationship with Chinese authorities, particularly due to the crucial role played by the Shanghai Gigafactory. This facility was responsible for producing over half of Tesla's global sales in 2022. In order to further expand its operations, including the establishment of a second massive factory in Shanghai, Tesla requires the support and approval of the Chinese government. As a result, Musk must exercise tact and diplomacy in navigating the delicate dynamics of the US-China relationship. The success of Tesla's future endeavors in China hinges upon maintaining a delicate balance and fostering positive relations with the Chinese government.
In addition to meeting government officials, Musk also had a significant encounter with an important business partner, Robin Zeng, the founder of CATL, the world's largest electric vehicle (EV) battery maker.
Their meeting likely revolved around discussions regarding the second Shanghai plant and the establishment of a new factory in the United States. This indicates that the relationship between Tesla and CATL is becoming increasingly symbiotic, as the success of each company relies on the contributions of the other.
With China being the largest electric vehicle (EV) market globally, it is crucial for Tesla to secure a significant foothold in order to maintain its leadership position. While BYD sells more cars, it's worth noting that a substantial portion of their sales includes hybrid vehicles. Tesla still leads in pure EV sales.
It is expected that Musk will maintain a cordial relationship with China for as long as necessary. Despite the ongoing geopolitical tensions between the United States and China, Tesla stands out as one of the rare companies capable of conducting business in both countries. This unique position allows Tesla to navigate the complexities of the US-China relationship and continue operating in both markets.